Broadcom Stock Tumbles After AI Chip Forecast Disappoints
Rendy Andriyanto
Gotrade Team
Reviewed by Gotrade Internal Analyst
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Gotrade News - Broadcom issued third-quarter AI chip guidance below expectations, triggering a sharp selloff. Broadcom shares tumbled more than 13% in after-hours trading following the report.
The disappointment stems from a market demanding perfection amid a long-running chip rally. That negative sentiment quickly spread across the entire global semiconductor sector overnight.
Key Takeaways
Broadcom's Q3 AI chip guidance of $16 billion missed the $16.36 billion analyst estimate.
Q2 AI semiconductor revenue surged 143% year-over-year to reach $10.8 billion.
Broadcom shares fell more than 13% in after-hours trading after the report.
The Guidance That Disappointed Markets
According to Investing.com, Broadcom projected third-quarter AI chip revenue of $16 billion. That figure fell short of the analyst consensus estimate of roughly $16.36 billion.
Total Q2 revenue came in at $22.19 billion, slightly below the $22.27 billion estimate. However, Q3 total revenue guidance of roughly $29.4 billion topped the $28.54 billion forecast.
Broadcom CEO Hock Tan highlighted the strength of the company's AI business in the report. Per Hock Tan, semiconductor revenue from AI grew 143% year-over-year to $10.8 billion.
That growth was driven by rising demand for custom AI accelerators and AI networking gear. Key customers such as Meta and Alphabet remain the main drivers of Broadcom (AVGO) chip demand.
Broadcom also targets AI chip shipments exceeding 10 gigawatts by the year 2027. Its long-term $100 billion sales target stays intact with a healthy 68% gross margin.
Despite the soft AI guidance, management still sees Broadcom's long-term fundamentals as solid. High margins and a roster of tech giants underpin the company's broader outlook.
Nvidia shares were roughly flat after hours, having fallen 3.6% in the regular session. That weakness reflects investor anxiety over stretched valuations across the AI chip sector.
S&P 500 futures fell 0.5% while Nasdaq 100 futures weakened by 0.7% early on. The prior trading session was also red, with the S&P down 0.7% and Nasdaq 0.9%.
The Dow Jones even dropped 1.2% in the prior session amid broad selling pressure. That volatility was compounded by geopolitical worries tied to rising tensions in the Iran region.
Direxion analyst Ryan Lee said the market now demands perfection for the rally to continue. Big Tech AI infrastructure spending is projected to exceed $700 billion in the year 2026.
That marks a sharp jump from the roughly $400 billion recorded back in 2025. This spending surge underscores that structural demand for AI chips remains firmly intact.
Not every chip name suffered from the negative sentiment of Broadcom's latest report. Rival Marvell actually climbed 3.73% as investors sought alternative AI chip exposure.
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