Broadcom shares hit in reaction to Apple's wireless chip plans
Justin Sullivan

Broadcom (NASDAQ:AVGO) shares fell almost 4% Tuesday as analysts and investors sussed out the implications of the chipmaker following reports that it could soon lose a big piece of its business from Apple (NASDAQ:AAPL).
On Monday, Bloomberg reported that Apple (AAPL) is planning to replace the combination Wi-Fi and Bluetooth chips it uses from Broadcom (AVGO) with its own, homemade chipset starting in 2025. The move is potentially huge for Broadcom (AVGO) as it counts on Apple (AAPL) for about 20% of its sales.
Wells Fargo analyst Aaron Rakers said that based on two work agreements between Apple (AAPL) and Broadcom (AVGO), which were signed in 2019 and 2020, Broadcom (AVGO) has been providing Apple (AAPL) with "a range of specified high-performance wireless components and modules over several years." Raker said the two agreements were estimated to generate about $15B in sales for Broadcom (AVGO). 
"From a Broadcom perspective, this likely creates an investor headwind given how significant Apple's revenue contribution is to Broadcom," Rakers said. 

Rakers currently has an equal weight, or neutral, rating on Broadcom's (AVGO) stock, with a price target of $580 a share.
At Bank of America Securities, analyst Vivek Arya left his buy rating and $680-a-share price target on Broadcom's (AVGO) stock unchanged. Arya said that "any loss of business at a prominent customer such as Apple is not a positive," but still remained positive about Broadcom (AVGO) due to factors such as the time frame for when Apple (AAPL) is set to make the switch to its own Wi-Fi and Bluetooth chipset.
Arya said that even with that loss, Broadcom (AVGO) "would still be left with a sizeable 12% to 15% Apple [business] exposure," and that Broadcom (AVGO) does have a history of divesting some of its business so as not to be so overly reliant upon Apple (AAPL).
Arya also noted that while the Apple (AAPL) news is a "modest negative" for Broadcom (AVGO) investors, the company's "profitability and growth are more dependent on unique data center [and] enterprise networking assets" and exposure to a strong market for cloud-based capital spending.

In late December, Broadcom (AVGO) shares took a hit as European Union officials launched what was called an "in-depth" investigation into the company's proposed $61B acquisition of VMware.