Broadcom, the California-based semiconductor giant, delivered what would be considered stellar results by almost any conventional metric. Revenue surged 48% year-on-year to a record $22.2 billion, AI chip sales more than doubled, and adjusted earnings per share rose 54% to $2.44, comfortably beating analyst expectations. Yet investors, conditioned to expect not just strong performance but ever-escalating guidance, punished the stock severely after the company declined to raise its long-term AI revenue target.
Shares tumbled more than 12% in after-hours trading, wiping out over $300 billion in market value. The drop came after Broadcom closed Wednesday's regular session at an all-time high of $495 per share. The sell-off highlights the extreme valuations and sky-high expectations that have come to define the AI sector, where even exceptional results can disappoint if they fail to surpass the most aggressive forecasts.
Insatiable demand, but not enough
CEO Hock Tan described AI demand as “simply insatiable” and maintained that the company's trajectory remains firmly intact. Broadcom guided third-quarter consolidated revenue to $29.4 billion, representing 84% year-on-year growth, and raised its full-year AI semiconductor revenue forecast to $56 billion, up roughly 180% from the last fiscal year. However, the third-quarter AI chip outlook came in below the most optimistic projections circulating on Wall Street, triggering the sell-off.
Broadcom is a critical supplier of custom AI accelerators and high-speed networking chips to the world's largest hyperscalers, including Google, Meta, and OpenAI. Its guidance carries significant weight for investors tracking the pace of AI development, and the disappointment quickly spread beyond US markets.
Ripples across Asian markets
Asian markets opened sharply lower on Thursday, with the sell-off concentrated in semiconductor and technology stocks. The MSCI index for Asian shares fell 1.6%, snapping a four-day rally that had pushed it to an all-time high. South Korea's KOSPI, widely regarded as a barometer for global AI investment sentiment given the prominence of its chip industry, dropped 1.8%, making it one of the region's worst performers. Samsung Electronics and SK Hynix, two of the world's leading memory chipmakers, declined between 2% and 4%, while LG Electronics fell nearly 14%. In Taiwan, key AI server assemblers Hon Hai Precision and Wistron dropped close to 4% and 8%, respectively.
The sell-off also weighed on European tech stocks, though the impact was more muted. The STOXX Europe 600 Technology index edged lower, with shares of ASML, Infineon, and STMicroelectronics all posting modest declines. European investors are closely watching the AI supply chain, as companies like ASML provide the lithography equipment essential for manufacturing advanced chips.
The broader context is one of heightened sensitivity to any sign that AI investment might be peaking. The sector has been a major driver of global equity markets, and any indication of a slowdown could have far-reaching consequences. For European policymakers and businesses, the episode underscores the risks of relying on a handful of US tech giants to sustain the continent's digital transformation. The EU's six largest economies recently agreed on a blueprint for a capital markets union, aiming to deepen the region's financial integration and reduce dependence on external funding sources.
While Broadcom's results were undeniably strong, the market's reaction serves as a reminder that in the AI gold rush, even the most successful miners can face harsh judgment if they fail to keep digging deeper. For now, the company's long-term prospects remain intact, but the episode has injected a note of caution into a sector that has been riding high on unbridled optimism.
