What Happened?
Shares of fabless chip and software maker Broadcom (NASDAQ: AVGO) fell 4.2% in the morning session after stocks in the semiconductor sector pulled back, driven by underwhelming news from key industry peers.
The decline appears linked to investor reaction to AI-chip leader Nvidia's recent earnings report, which, despite a positive forecast, failed to exceed Wall Street's lofty expectations, causing its shares to fall. This created a ripple effect across the industry, impacting other chipmakers.
Adding to the pressure, a weak forecast from fellow chipmaker Marvell further soured sentiment on the entire semiconductor sector. The negative news from these major players prompted investors to reassess the near-term growth prospects for chip companies, leading to widespread losses among the group.
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What Is The Market Telling Us
Broadcom’s shares are very volatile and have had 26 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 9 days ago when the stock dropped 3.1% on the news that the major indices continued to pull back, with technology stocks accounting for most of the market's largest decliners.
A key reason for this trend is that much of the recent market gains were concentrated in the "AI trade," which includes these large technology and semiconductor companies. So this could also mean that some investors are locking in some gains ahead of more definitive feedback from the Fed.
Despite the downturn, some analysts viewed this as an opportunity to own some of the "Core AI winners." Dan Ives of Wedbush Securities commented, "In our view, the tech bull cycle will be well intact for at least another 2-3 years, given the trillions being spent on AI infrastructure/software/chips/power/apps looking ahead. This remains our tech playbook and investor roadmap."
Additionally, mixed earnings reports from retailers, such as Target, have added to the market's weakness. Investors are closely monitoring these reports for insights into the broader economic health and the potential impact of new tariffs on inflation.
Broadcom is up 27.1% since the beginning of the year, and at $294.95 per share, it is trading close to its 52-week high of $312.83 from August 2025. Investors who bought $1,000 worth of Broadcom’s shares 5 years ago would now be looking at an investment worth $8,496.
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