Key Takeaways
- Broadcom shares have declined approximately 24% from their peak near $495.
- The company reported record Q2 revenue of $22.2B, featuring AI chip sales that soared 143% annually to $10.8B.
- Management’s Q3 AI chip forecast of roughly $16B disappointed investors expecting $17B or higher.
- CEO Hock Tan maintained the fiscal 2027 AI chip revenue target above $100B without raising it, dampening market sentiment.
- Wall Street analysts stay optimisticāJPMorgan reaffirmed its Overweight stance with a $580 target price.
Broadcom delivered what should have been a triumphant fiscal second quarter. Year-over-year revenue climbed 48% to reach $22.2 billion. The company posted adjusted earnings of $2.44 per share. AI semiconductor sales exploded 143% higher to $10.8 billion. Yet the stock plummeted 24% from its peak anyway.
This disconnect reveals how extraordinarily high investor expectations had climbed.
The market reaction wasn’t triggered by poor performance. Instead, forward-looking projections failed to satisfy a market that had anticipated flawless execution. Broadcom projected approximately $16 billion in AI chip revenue for its fiscal third quarter. While this represents more than triple the prior-year amount, market participants had positioned for $17 billion or beyond.
The additional disappointment: CEO Hock Tan declined to elevate the company’s extended AI chip projection. He maintained the current forecast exceeding $100 billion in AI chip revenue by fiscal 2027. In today’s environment, standing pat was interpreted as caution.
Trading activity surged dramatically during the decline. This wasn’t gradual portfolio adjustmentāit was immediate repricing.
The Reality Behind the Headlines
An interesting discrepancy emerges from the data. Broadcom delivered $10.8 billion worth of AI chips during the quarter. However, Tan revealed that AI semiconductor bookings for the identical period exceeded $30 billion. Customers are placing orders at nearly three times current shipping capacity. This signals robust, not weakening, demand.
Tan characterized appetite for XPUs and networking equipment as “simply insatiable.” The semiconductor giant has secured gigawatt-scale agreements with major AI players including Anthropic, OpenAI, and Meta, projecting deliveries surpassing 10 gigawatts of AI chips by 2027.
On June 24, Broadcom and OpenAI unveiled their inaugural collaborative custom AI chip, dubbed the JalapeƱo. Engineered specifically for inference workloads, it’s currently operational in laboratory environments running OpenAI’s GPT-5.3-Codex-Spark model. Tan informed Reuters the chip delivers performance comparable to Nvidia’s Blackwell GPU lineup and Google’s TPU offerings. OpenAI intends to implement it commercially before this year concludes.
The Analyst Perspective
Wall Street research teams aren’t retreating. JPMorgan maintained its Overweight recommendation and $580 price objective following the selloff, advising clients they would be “aggressive buyers” at present valuation levels.
The wider analyst consensus remains decidedly positiveāthe overwhelming majority maintain Buy ratings, with average price targets continuing above the $500 threshold.
Legitimate concerns exist. CFO Kirsten Spears has noted potential margin compression as AI represents an expanding portion of Broadcom’s revenue mix, since certain AI system contracts carry thinner margins compared to the software division. Tan has also recognized that Google might eventually diversify its TPU supplier base, though Broadcom stays integral to Google’s semiconductor strategy.
The downturn rippled through the semiconductor sector. Nvidia, AMD, Marvell, Intel, and Micron all experienced downward pressure in subsequent trading sessions as investors recalibrated AI-related company valuations industry-wide.
Broadcom’s fiscal Q3 AI chip guidance of around $16 billion, though below analyst expectations, would nonetheless represent triple the comparable year-ago performance.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
