Broadcom Secures Over $30 Billion in Apple Orders, Will It Signal a Return to Historic Highs?

TradingKey - Broadcom secures massive Apple order, laying the groundwork for its stock price to return to historical peaks, but faces short-term pressure from liquidity and macroeconomic events.

On July 8, Eastern Time, Broadcom ( AVGO) announced that it has secured an epic five-year deal worth up to $30 billion from Apple ( AAPL ). It is reported that this agreement directly extends the contract to 2031 and is expected to drive the shipment of over 15 billion U.S.-made chips.

Stimulated by this positive news, Broadcom's stock price once soared by over 6% before narrowing to 4.83% to close at $388.69, hitting a near half-month high and recovering some of its recent losses. On June 3, Broadcom's stock price surged to $495, setting a record high, before continuing to fall to a low of $356 on July 2, resulting in a maximum drawdown of 28%. Currently, it is still down 21% from its peak, so can this positive news propel it back to its peak?

Over the past two years, Wall Street's biggest concern regarding Broadcom has been "Apple's de-Broadcomization." As Apple aggressively pushes for self-developed RF, Wi-Fi, and Bluetooth chips, the market feared Broadcom would repeat the tragedy of Qualcomm ( QCOM) being gradually phased out by Apple's self-developed 5G baseband chips. This $30 billion contract, signed directly through 2031 and including joint development of custom chips, is equivalent to Apple granting Broadcom a long-term golden shield for the next 5 years. This completely eliminates the market's biggest "tail risk," fully opening up room for P/E ratio restoration.

What excites foreign capital most about this order is not just the traditional mobile wireless chips, but custom AI chips (ASICs). Broadcom is the absolute king in the global ASIC field, having previously helped Google ( GOOG) develop TPUs and Meta ( META) develop AI chips. Now, with the addition of Apple, a $1.8 trillion giant, Broadcom's guidance to easily exceed $100 billion in AI chip revenue by fiscal year 2027 has officially transformed from a verbal commitment into a concrete order in black and white, significantly increasing the probability of achievement.

This deal reached between Broadcom and Apple is also a clever political gesture, precisely responding to the White House's pressure for the "re-shoring of semiconductor manufacturing," helping Apple avoid the threat of high 25% import tariffs. For Broadcom, its U.S.-based manufacturing capacity (formerly the HP site) has turned into a highly strategic political asset, which will continue to attract defensive buying from hedge funds in the second half of the year.

Although the fundamentals are impeccable, it remains difficult for Broadcom to break through historical highs in one go in the short term because this deal is long-term and will not be immediately reflected in financial reports. More importantly, SpaceX ( SPCX) was just added to the Nasdaq 100 index this week, and SK Hynix plans to launch a massive $28 billion listing on the US Nasdaq this Friday (July 10), causing global passive funds to conduct technical selling of existing tech giants to free up capital and cover positions.

From a technical analysis perspective, Broadcom's stock price is still in a downward channel, which is a bearish signal. Next, Broadcom's stock price needs to break through and stabilize above the $400 mark to reverse this downward trend and continue rising to challenge its historical peak. However, the recent escalation of the US-Iran conflict has triggered a surge in oil prices, and just-declined inflation expectations have risen again, which poses a huge obstacle to the rise of tech stocks, especially AI stocks, and Broadcom's stock price will inevitably be suppressed by it. Broadcom Stock Chart, Source: TradingView