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Against the backdrop of all the volatility associated with the tariffs in the market, the leader of the semiconductor of Broadcom NASDAQ: AVGO It has become better than many. Since the announcement of Trump’s tariff reached the market on April 3, Broadcom shares have grown by almost 8% From April 9, closed.

This performance is impressive, given that the S&P 500 index has decreased by almost 3% for this period. InVesco Phlx Semiconductor ETF NASDAQ: SOXQ decreased by 2%.

Nevertheless, Broadcom fell more than 10% on April 3 in response to an announcement of the Liberation Day.

The next day, he fell by another 5%when the Chinese announced mutual tariffs. Thus, the markets clearly feel that Broadcom has some tariff risk.

This is happening, although Trump excluded semiconductors from his tariffs.

The analysis will break below The exposure to the Broadcom tariff in two ways: direct and indirect exposure.

He will also consider why the action showed relatively well.

Consequences with direct tariffs: release from the semiconductor provides a break

In general, because the semiconductors are exempted from tariffs, Direct exposure of the BDCOM A little minimum. However, semiconductors may come. President Trump recently said that Chips tariffs will come “very soon”. This will have a significant impact on the Broadcast business. In 2024, 20% of the total income of the company came from China. Tariffs for these goods will prevent demand in the country.

However, at the moment, the direct influence of tariffs on the spray is not the main problem, especially that Trump softens its position. He announced that countries that do not accept return tariffs will be Freed from the latest US tariffs. This sent the market – and the shares of Broadcom – still. This signals that Trump does not draw a hard line in the sand and can facilitate its aggressive tariff policy. It also suggests that he can return the idea of ​​selling tariffs for chips.

It is noteworthy that the tariffs were not the big topic of the conversation at the Broadcom meeting with analysts. Since August 2024, participants in five income or conferences of the company used the word “tariffs” only three times.

The consequences of indirect tariff: the big problem of the Broadcast

A The indirect influence of tariffs It will probably be much more influential on Broadcom. Imported products containing Broadcom chips are subject to tariffs. A The vast majority of the chip production occur in Asia, This means that the final products sent to the United States will face higher costs.

These higher costs will deteriorate the demand for these products and, therefore, Broadcom chips inside them. This can affect both the Broadcom chip and not AI chip business. Both were a little less than 28% of the revenue in the last quarter.

Within chips that are not related NASDAQ: Aaplwho uses his chips in his consumer devices. It is expected that tariffs will affect Apple sales and profit, Broadcom will probably also receive a blow.

AI Broadcom servers can also be significantly influenced Asian production. Reports show that in general, 60% of the AI ​​servers are produced in Mexico, And 30% come from Taiwan. Staisi Ragson from Bernstein Research does not expect that tariffs will affect those servers made in Mexico.

If the production of AI Server Broadcom is similar to these numbers, it can avoid a significant number of tariffs for its artificial intelligence business. It is important to note that the locations of the companies producing these servers for Broadcom are unknown. Actual numbers can be significantly different.

Why Broadcom performed relatively good in bad market conditions

One of the probable reasons why the Broadcom shares were relatively good is that that His clients of AI are hyperpees. These companies are rich in cash and consider AI as extremely important for their long -term purposes. This means that most of Broadcom sales can remain largely untouched, since these companies determine the priorities of expenses on AI.

Besides, Infrastructure software amounted to 45% of the company’s revenue in the last quarter. This does not affect current tariffs. Nevertheless, companies can reduce expenses here to make up for higher costs in other areas.

Another factor that was a blessing for Broadcom shares is a large announcement that he recently made. Broadcom announced a promotion program of shares in the amount of $ 10 billion after the market closing on April 7, A sign of constant confidence of the Broadcast In your business and the ability to generate money, despite the indefinite macroeconomic environment ahead.

In general, there are grounds for Believe that Broadcom has moderate insulation from tariffs. However, if the tariffs lead to a recession, this would certainly be bad for business. It will be very interesting to see what management speaks of tariffs in the future.

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