Stock Market Today, June 4: Broadcom Shares Plunge After AI Outlook Misses High Investor Expectations
Broadcom (NASDAQ:AVGO), which designs and supplies semiconductor devices and infrastructure software solutions, closed Thursday at $418.91, down 12.59%. The stock fell after fiscal Q2 results and AI guidance, which showed strong growth but disappointed lofty expectations. Investors are watching how AI chip demand and software margins support the multiyear growth outlook.
Trading volume reached 79.9 million shares, about 214% above its three-month average of 25.5 million shares. Broadcom IPO'd in 2009 and has grown 25,759% since going public.
How the markets moved today
The S&P 500 (SNPINDEX:^GSPC) added 0.41% to finish at 7,585, while the Nasdaq Composite (NASDAQINDEX:^IXIC) slipped 0.09% to close at 26,831. Among semiconductors, Nvidia (NASDAQ:NVDA) closed at $218.66, up 1.94%, while Texas Instruments (NASDAQ:TXN) finished at $305.37, down 1.04%, underscoring diverging reactions across the sector.
What this means for investors
Investors have recently been balancing the strong demand and AI-related growth in semiconductor companies with concerns about overspending and potentially disappointing returns on large capital investments.
Broadcom creates, produces, and provides an extensive array of semiconductor and infrastructure software solutions, giving it a foothold in a large part of the AI universe.
Today’s market move, though, was a classic example of investors selling the news. Broadcom reported quarterly records in earnings and revenue, and predicted fiscal Q3 revenue that would represent about 84% year-over-year growth. That wasn’t enough, however, after shares had soared leading up to the report.
Even with today’s drop, the stock is trading at a forward price-to-earnings (P/E) ratio of about 37, above its three-year average. With strong prospects ahead, though, today’s drop represents a good entry opportunity for those with a long-term view as Broadcom could surprise to the upside in future quarters. That makes today’s valuation compelling.
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Howard Smith has positions in Broadcom and Nvidia. The Motley Fool has positions in and recommends Broadcom, Nvidia, and Texas Instruments. The Motley Fool has a disclosure policy.
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