Broadcom (AVGO) may be facing some emerging risks for the growth of the company's software business, UBS Securities said in a note emailed Tuesday.

The investment firm said it believes that a recent correction in software multiples has been a factor in Broadcom's "lagging stock performance."

UBS said that Broadcom may see a "potential increase in VMware customer churn" this year and next as three-year deals come up for renewal. Also, AI coding agents are "compressing code/app modernization timelines and pushing more on-prem workload to the cloud," the note said.

UBS said, however, it believes that its assumption that Broadcom's software business will see an about 4% to 6% compound annual growth rate until 2029 "still accounts for these risks."

The investment firm noted that the growth of Broadcom's "semiconductor business has taken off due to AI" with a large part of this growth coming from hyperscalers and large language model, or LLM, developers.

"It is true that software provides stable cash flows, but [Broadcom's] growth is being held back more than ever by the software business, and compute remains a hole where [Broadcom] could potentially allocate additional capital to fully flesh out its AI offerings," the note said.

The investment firm said that, amid "inflecting TPU units," its sees Broadcom's $8.2 billion AI revenue guidance for fiscal Q1 as "conservative" and also sees the consensus estimate of about $9.3 billion for fiscal Q2 as "a few hundred millions low too."

UBS reiterated Broadcom's buy rating, while keeping the company's $475 price target.

Price: 324.91, Change: -5.43, Percent Change: -1.64