Investing.com -- Investment bank Macquarie has downgraded Broadcom from Outperform to Neutral, citing growing concerns that key customer Google is increasingly developing its own artificial intelligence (AI) chip capabilities and diversifying suppliers. The firm also cut its 12-month price target on Broadcom by 15% to $437 per share, down from $513.

Macquarie analysts said Broadcom's dominant position in the fast-growing AI application-specific integrated circuit (ASIC) market is facing new competitive pressure. Google, historically dependent on Broadcom for its AI chip supply chain, is now working with MediaTek while simultaneously expanding internal chip-development efforts. As a result, Macquarie expects Broadcom's market share to decline significantly between 2027 and 2028.

Despite the downgrade, Broadcom continues to deliver strong near-term financial results. The company reported fiscal second-quarter revenue of $22.2 billion, up 48% year-over-year, while AI-related revenue reached $10.8 billion. Management forecast third-quarter revenue of approximately $29.4 billion, supported by robust AI demand and roughly $30 billion in new AI bookings secured during the quarter.

Macquarie raised its earnings forecasts for fiscal 2026 and 2027 by 12% and 14%, respectively, reflecting continued AI demand and a recovery in non-AI semiconductor markets. However, it cut its 2028 earnings estimate by 21%, warning that increased competition in AI ASICs could weigh on growth and profitability.

The research firm forecasts Broadcom's share of Google's TPU-related revenue to fall from roughly 95% in 2026 to 80% in 2027 and 65% in 2028, as MediaTek gains a larger role and Google advances its in-house chip strategy.

While Macquarie sees limited upside due to market-share concerns and potential margin pressure, it also believes downside risk is constrained by valuation. Broadcom currently trades at around 25 times its historical average earnings multiple, below many global semiconductor peers.

The downgrade marks a notable shift in sentiment toward one of the biggest beneficiaries of the AI infrastructure boom, highlighting growing investor focus on how hyperscale technology companies balance partnerships with external chip suppliers against the drive to develop proprietary silicon.