Broadcom Sales Miss Sparks Profit-Taking Rout in Asian AI and Chip Stocks

Key Takeaways

• Broadcom’s mixed quarterly revenue and flat AI sales outlook triggered an aftermarket stock slump in New York.

• The selloff spilled into Asian markets on Thursday, heavily impacting major tech firms in Japan, South Korea, and Taiwan.

• Geopolitical tensions and recent massive valuation gains have left the AI sector highly vulnerable to profit-taking.

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Asian semiconductor and artificial intelligence stocks tumbled on Thursday after Broadcom Inc.’s disappointing revenue outlook sparked a wave of global tech profit-taking.

The selloff began in New York on Wednesday evening after Broadcom shares plunged 12% in extended trading. Although the chip designer beat second-quarter profit estimates, its overall revenue fell short of consensus. Furthermore, Broadcom kept its current-quarter AI revenue forecast locked at $16 billion, missing Wall Street’s expectation of $16.36 billion. Consequently, this lukewarm guidance triggered immediate spillover losses for major U.S. peers like Intel Corp. and AMD, before rolling into Asian markets the following morning.

Japanese and South Korean tech firms bore the brunt of the downturn. In Tokyo, SoftBank Group Corp. plummeted over 10%, while critical data center suppliers Ibiden and Socionext dropped 8.4% and 6.7%, respectively. Meanwhile, South Korea’s memory champions, Samsung Electronics Co. and SK Hynix Inc., slid between 2% and 4%, while consumer electronics giant LG Electronics Inc. cratered nearly 14%.

Taiwan’s vital AI server assembly sector also faced steep declines. Hon Hai Precision Industry Co. fell nearly 4%, while Wistron Corp. slumped 8%. In contrast, Taiwan Semiconductor Manufacturing Co. (TSMC) showed resilience, dipping just 0.8%. Downside for the world’s largest contract chipmaker was limited because CEO C.C. Wei actively reassured investors that multi-year demand for AI infrastructure remains fundamentally robust.

Chip stocks had logged stellar gains throughout May on unbridled AI optimism. Therefore, analysts note the sector was highly vulnerable to a pullback. This stretched positioning, combined with simmering Middle East geopolitical tensions, ultimately prompted investors to lock in profits at the first sign of a fundamental slowdown.