Key Points
- Broadcom’s stock plunged 11% despite beating Wall Street estimates and raising its forecast.
- The sell-off hit the entire AI sector, including major players like Nvidia, AMD, and Oracle.
- Investors appear to be taking profits after a massive rally in AI-related stocks this year.
- Despite the drop, Broadcom’s business is very strong, with AI chip sales up 74% and a huge order backlog.
Broadcom delivered fantastic quarterly results and an even better forecast, but on Wall Street, it didn’t matter. Investors hammered the chipmaker’s stock on Friday, sending it down 11% in its worst day of the year. The move signals that the red-hot artificial intelligence trade is finally cooling off.
The sell-off sent a shiver through the entire AI sector. Oracle, which had already plunged after its own earnings report, dropped another 4.5%. AI leaders Nvidia and Advanced Micro Devices also slid about 3% and 5%, respectively.
This weakness in AI is a big deal for the entire market. For months, AI has been the primary driver of stock prices higher, so any sign of trouble attracts significant attention. The broader Nasdaq and S&P 500 indexes both fell on the news.
The companies hardest hit are those that build the essential infrastructure for AI. Broadcom, for example, makes custom chips for tech giants like Google and Meta. Its stock had been on a tear, but investors are now rushing to cash in their profits.
Many analysts, however, see this as a healthy correction and a buying opportunity. “This stock is up 75-80% year to date. You’re seeing a little bit of a pullback,” said Mizuho analyst Vijay Rakesh.
So, what are investors worried about? Some point to concerns about lower profit margins in the short term.
Others might have been disappointed that a major deal with OpenAI won’t deliver big results until 2026. Still, Broadcom’s business is booming, with a massive $73 billion backlog of AI orders. But for now, a wave of “AI angst” seems to have taken over.
