Jim Cramer is certainly one of the most prominent entertainers and financial commentators within the equity markets. His long-time followers tend to pay close attention to his recommendations. Accordingly, when Jim Cramer steps up and suggests that Broadcom (NASDAQ:AVGO) stock is likely to get a boost from conditional antitrust approval from Chinese regulators, his followers listen.
This antitrust approval relates to Broadcom’s highly-anticipated acquisition of VMware (NYSE:VMW). Like other major acquisitions, regulators in key markets must give their stamp of approval for the deal to move forward. The Chinese State Administration for Market Regulation is expected to “approve the acquisition of VMware with behavioral remedies,” setting the stage for this deal to move forward later this month or in November.
Let’s dive into why AVGO stock is surging on this news.
AVGO Stock Surges on Expected Regulatory Acquisition Approval
Broadcom’s acquisition of VMware is certainly an intriguing one, as it provides the semiconductor company with some impressive vertical integration. Via acquiring a cloud and virtual machine company, Broadcom is widely expected to become a new kind of chip company — and one that specific investors will gravitate toward.
This is the reason why I believe the market is cheering this potential regulatory approval today. Normally, shares of the target company (VMW stock) surge on such news — and VMware’s share price is moving in the same direction today. However, the ability for Broadcom to diversify its business model as a result of this deal is leading to outsized interest in AVGO stock today. That suggests that this acquisition is also the right strategic move for the firm.
Jim Cramer’s view is that this potential approval, along with VMware’s artificial intelligence (AI) efforts, could propel AVGO stock higher from here. I tend to agree.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
