Broadcom Stock Crashes 12% on Weak AI Forecast, June 05

Broadcom AVGO shares fell 12% to $418.91 on June 4 after the chipmaker reported Q2 revenue of $22.19 billion, beating the $22.13 billion consensus. However, the stock sank because AI chip sales guidance for Q3 came in at $16 billion, below analyst estimates of $17.2 billion. The decline erased $300 billion in market value and triggered a broader selloff in semiconductor stocks, raising concerns about AI spending momentum.

The Numbers Behind the Selloff

Broadcom beat on headline earnings. Q2 revenue reached $22.19 billion, up 48% year over year, and adjusted EPS came in at $2.44 versus estimates of $2.39. AI semiconductor revenue was the bright spot at $10.8 billion, up 143% year over year. But the forward guidance spooked investors. The company projected Q3 AI chip sales at $16 billion, falling short of Wall Street’s $17.2 billion estimate. Broadcom also did not raise its full-year AI revenue forecast, keeping it at over $100 billion for fiscal 2027.

Why the Market Punished the Stock

The stock fell because expectations were too high. Broadcom shares had rallied 38% this year and hit multiple all-time highs in the two weeks before earnings. CEO Hock Tan acknowledged that Google would diversify its chip suppliers, signaling less exclusivity for Broadcom. He also warned that the rapid growth of AI semiconductors was diluting overall gross margins by shifting the product mix away from higher-margin software. AI semiconductor sales hit $10.8 billion in the quarter, but the company’s inability to beat AI guidance created a sell-the-news reaction.

Ripple Effects Across the Sector

The Broadcom decline dragged down peers and the broader market. AMD and Intel fell despite no company-specific news, as investors reacted to the AI sentiment shift. Samsung Electronics and SK Hynix in South Korea fell nearly 7% and over 8%, respectively. The VanEck Semiconductor ETF lost more than 1%. However, the Dow Jones rose 875 points to a record high as investors rotated into healthcare and financial stocks, signaling a tactical shift away from chip names.

What Meyka’s Data Says

Meyka rates AVGO a B (Neutral), with a 12-month price target of $343.27, implying 18% downside from the current price. The stock trades at a PE ratio of 67.75, well above historical norms, leaving little room for error. Analyst consensus remains Buy with 50 firms rating the stock as Buy and only 3 as Hold. The technical picture shows RSI at 49.37, indicating neutral momentum, while the ADX at 28.59 signals a strong downtrend.

Final Thoughts

Broadcom beat earnings but missed on AI guidance, triggering a 12% drop and $300 billion market cap loss. With Meyka rating the stock B and the valuation stretched at 67x PE, the data suggests limited upside without a recovery in AI spending forecasts.

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The content shared by Meyka AI PTY LTD is solely for research and informational purposes.  Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.