Broadcom (AVGO) delivered what should have been a blowout earnings report — AI semiconductor revenues surging 143% year over year, quarterly guidance of $29.4 billion, and expectations of AI chip revenue tripling to $16 billion next quarter. Yet the stock fell 13% after the announcement, dragging the broader AI trade down with it. If you owned AVGO or any AI-adjacent chip stock and found yourself confused, you weren’t alone.
The selloff came down to one thing: expectations. CEO Hock Tan held the full-year AI chip guidance steady rather than raising it, which spooked investors who had priced in an upgrade. The software segment also came in light, and Tan signaled Broadcom would focus on “chips only” going forward — stepping back from the more integrated AI system offerings it had previously floated. On a stock that had already climbed over 60% from its late-March lows, any deviation from a perfect script was enough to trigger profit-taking. That’s the brutal math of a high-expectations trade: when a company delivers excellence and the market had priced in perfection, the gap gets punished.
For retail investors, this moment is instructive. Broadcom’s underlying AI business remains among the strongest in the semiconductor sector — its custom chip work for hyperscalers like Google and Meta is not going away, and tripling AI revenue in a single quarter isn’t a sign of weakness. The selloff is a valuation story, not a business story. If you’re a long-term holder of AVGO or ETFs heavy in AI semiconductors like SOXX or SMH, the key question is not “is the AI buildout slowing?” — it isn’t — but rather “how much of future growth is already priced in?” Broadcom’s Investor Day on June 24 may offer additional clarity on guidance. Investors who’ve been waiting for a better entry point on AI chip names just got handed one — but the volatility is a reminder that in high-multiple sectors, the ride is never smooth.
