Broadcom stock (NASDAQ: AVGO) has fallen sharply from its record high, but the selloff may say more about investor expectations than about weakness in AI demand.
Shares have retreated from around $495 to much lower levels, leaving the stock more than 24% below its peak.
That looks brutal, but Broadcom’s latest quarter was not a demand collapse. The company reported record revenue, strong earnings and a huge jump in AI semiconductor sales.
Broadcom stock: What actually triggered the sell-off
Broadcom’s fiscal second-quarter numbers were strong on the surface.
Revenue rose 48% from a year earlier to a record $22.2 billion, while adjusted earnings came in at $2.44 a share. AI semiconductor revenue jumped 143% year on year to $10.8 billion.
The real trigger was guidance. Broadcom said it expects AI chip revenue of about $16 billion in the fiscal third quarter.
That would still be more than triple the year-earlier level, but it came in below the roughly $17 billion-plus investors had hoped for.
The bigger disappointment was that CEO Hock Tan did not raise Broadcom’s longer-term AI target. He reiterated that the company is still aiming for more than $100 billion in AI chip sales in fiscal 2027.
In this market, “on track” was not enough.
Trading volume surged as the stock fell, showing this was a panic-style reset rather than a slow reassessment.
What Wall Street and Hock Tan are actually saying now
Broadcom’s management still sounds confident about demand.
Tan said demand for XPUs and networking is “simply insatiable,” adding that AI semiconductor bookings in the quarter were over $30 billion against the $10.8 billion the company shipped.
That means customers are still ordering far more than Broadcom can currently deliver.
The company has also pointed to gigawatt-scale commitments from major AI customers, including Anthropic, OpenAI and Meta.
Broadcom now expects to ship more than 10 gigawatts of AI chips in 2027, slightly above its earlier view.
Wall Street has not abandoned the stock either. JPMorgan reiterated its Overweight rating and $580 price target, telling clients it would be “aggressive buyers” at current levels.
The broader analyst picture remains heavily bullish. Recent consensus screens show dozens of Buy ratings, only a handful of Holds and no Sells, with average price targets still above $500.
There are real risks as CFO Kirsten Spears has previously flagged margin pressure as AI becomes a bigger part of Broadcom’s mix, because some AI system sales may carry lower margins than its software business.
Tan has also acknowledged that Google may diversify TPU suppliers over time, even though Broadcom remains central to Google’s custom chip roadmap.
Nvidia and the wider chip rout
Broadcom’s drop did not happen in isolation.
The selloff spilled into the broader semiconductor space, with Nvidia, AMD, Marvell, Intel, Micron and other chip names also coming under pressure in the days after the report.
Texas Instruments and Analog Devices were hit in a wider chip-sector pullback as investors questioned whether AI-related valuations had run too far.
The market was looking for any sign that the AI trade had become too crowded.
Broadcom’s decision not to raise its long-term target gave investors an excuse to take profits across the group.
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