Therese Poletti’s Tech Tales: Broadcom’s deal to buy VMware may be in jeopardy, but its soaring stock will be just fine

As Broadcom Inc. and VMware Inc. get closer to their new merger deadline of Nov. 26, some investors are nervous that the deal will not get done, with a $1.5 billion termination fee hanging over the chip maker. China is reportedly the cause for the current hold-up for the deal, which was supposed to close by Oct. 30. The Chinese government has not signed off on the acquisition, now valued at nearly $70 billion, which would become one of tech’s biggest mergers ever if it is completed.

While the delay of the massive deal, first announced in May 2022, has hurt VMware’s shares
VMW,
-0.29%,
it has not hurt Broadcom
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-1.11%.
Last week, Broadcom closed at an all-time high of $957.52 and the stock is on track for its best year since 2014, having soared nearly 70% in 2023. And its shares have risen over the past two weeks despite the deal’s delay. The companies said in an update on Oct. 30 that they expect the merger to close before the November termination date. Neither Broadcom nor VMware responded to requests for comment. “I think [Broadcom’s] stock has risen more on the AI story than on VMware,” said Bernstein Research analyst Stacy Rasgon, who added that he hopes the deal goes through, because it fits with Broadcom’s software strategy. In August, Broadcom Chief Executive Hock Tan said 15% of the company’s semiconductor revenue came from AI, and that would rise to 25% in 2024. A big part of its AI revenue comes from developing Google’s tensor processing units (TPUs). Broadcom shares did get hit in September over a report by The Information that said Alphabet
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