Broadcom (AVGO) shares slid 3.3% to $425.19 on Friday, pacing a sector-wide retreat in AI-linked semiconductor stocks as macroeconomic pressures dampened investor sentiment. The decline came amid a broad pullback that saw Nvidia (NVDA) fall 4.4% and Advanced Micro Devices (AMD) drop 5.7%, while Marvell Technology (MRVL) lost 3.1%.
The selloff was triggered not by company-specific news, but by a shift in the macro environment. Oil prices climbed and U.S. Treasury yields moved higher, stoking concerns that inflation could remain stubbornly elevated. That, in turn, raised expectations that the Federal Reserve may keep interest rates at higher levels for longer, weighing on growth-oriented stocks like chipmakers.
According to CME FedWatch, investors priced in roughly a 60% probability of a 25-basis-point rate hike by the January 2027 meeting, while a December move was seen as a coin toss. Prediction markets echoed the sentiment, with Polymarket showing a 67% chance of zero Fed cuts in 2026 and Kalshi assigning 68% odds to the same outcome.
Broadcom has become a bellwether for AI infrastructure spending, with its valuation heavily tied to demand for custom AI accelerators and data center networking gear. The company reported strong first-quarter results in March, with revenue up 29% year over year to $19.31 billion and AI revenue surging 106% to $8.4 billion. CEO Hock Tan guided for $10.7 billion in AI semiconductor revenue in the second quarter, calling the AI business "accelerating."
Despite the positive fundamentals, the stock remains sensitive to sentiment shifts around AI spending. The recent rally had pushed major U.S. indexes to new highs before the pullback, leading some analysts to argue the market had gotten ahead of itself. "There's a realization that the market had gotten way ahead of itself," said Kenny Polcari, chief market strategist at Slatestone Wealth.
The broader AI chip landscape remains intensely competitive. Cerebras Systems raised $5.55 billion in its Nasdaq IPO on Thursday, with shares surging 89% from the listing price. While such demand supports the long-term AI narrative, it also fuels concerns about crowded trades and profit-taking.
Looking ahead, Broadcom's fortunes are tied to the spending plans of hyperscale cloud providers. The company is expected to supply 1 gigawatt of TPUs for Anthropic in 2026 and 3 gigawatts in 2027, while also preparing to ship OpenAI's first AI chip in 2027. D.A. Davidson analyst Gil Luria called Broadcom's guidance "very encouraging," and Tan told analysts that Meta's custom accelerator roadmap remains "alive and well."
However, the market is increasingly demanding proof rather than backlog and forecasts. If oil prices continue to drive inflation and yields stay high, price-to-earnings multiples for chip stocks could face further compression. Broadcom's premium valuation may come under additional pressure if cloud buyers delay orders or if custom AI chip margins prove thinner than expected.
