Broadcom Inc. (AVGO) shares continued their steep decline this week, tumbling nearly 20% over the past two sessions and dragging the broader semiconductor sector lower. The rout, which wiped out roughly $1.3 trillion in market value from U.S.-traded chipmakers, reflects growing investor anxiety that sky-high expectations for artificial intelligence-related growth may have peaked.
The stock closed Friday at $385.73, down from $479.23 on Wednesday and $459.97 at Monday's close, according to LSEG data. The selloff accelerated after Broadcom reported record fiscal second-quarter revenue of $22.2 billion, a 48% year-over-year increase, yet still fell short of the $22.27 billion analysts had expected. More critically, the company's forecast for AI-chip sales of $16.0 billion in the third quarter missed the $16.36 billion consensus estimate from Visible Alpha.
CEO Hock Tan highlighted strong momentum, noting that AI semiconductor revenue reached $10.8 billion in the quarter, up 143% from a year ago, driven by demand for custom AI accelerators and networking products. However, the miss on the forward guidance proved too much for a stock that had already priced in perfection. Ben Bajarin of Creative Strategies noted that Broadcom 'just didn't raise it' enough, while Ryan Lee from Direxion called the drop a sign that the market 'demands perfection' for chip stocks to keep rising.
Broader Market Fallout
The PHLX Semiconductor Index plunged 10.3% on Friday, its steepest one-day decline since March 2020. Nvidia lost about 6%, AMD slid nearly 11%, Marvell Technology tumbled 17%, and Broadcom itself sank 7.9% in the session. The selloff extended to the broader market, with the Nasdaq dropping 4.18%, the S&P 500 falling 2.64%, and the Dow Jones Industrial Average declining 1.35%.
Ohsung Kwon, chief equity strategist at Wells Fargo, told Reuters the sector looked 'way overbought' but added he doesn't think it's 'the end of the semi bull market.' Dennis Dick, proprietary trader at Triple D Trading, was more blunt: 'Blindly buying the dip had been winning you money, but that ended today.'
Macro Headwinds Intensify
The selloff was compounded by stronger-than-expected jobs data. The U.S. economy added 172,000 jobs in May, beating forecasts by a wide margin, fueling speculation that the Federal Reserve could maintain tight monetary policy or even raise rates again this year. Higher interest rates typically pressure growth stocks by reducing the present value of future earnings.
The combination of a disappointing AI forecast and rising rate fears created a perfect storm for chip stocks. Ryan Detrick, chief market strategist at Carson Group, said 'the dam just broke,' ending a nine-week winning streak for equities led by technology and semiconductor names.
What's Ahead
Investors now face a critical test with the release of the U.S. Consumer Price Index (CPI) on Wednesday, June 10. If inflation data comes in hotter than expected, yields could continue to climb, keeping pressure on high-multiple chip stocks. For Broadcom, the key question is whether the pullback represents a buying opportunity in a leading AI player or the beginning of a broader reassessment of custom-chip demand.
While Nvidia remains the dominant name in AI graphics processors, Marvell Technology is also vying for custom-chip contracts from major cloud providers. The danger for Broadcom is that rising inflation sends yields higher just as investors question the AI outlook, potentially leading to further declines even if revenue remains strong. Conversely, if rates stabilize and demand holds, last week's drop may prove to be an overreaction by traders caught offside.
