Broadcom shares declined over 3% in early trading on Friday after its third-quarter revenue forecast failed to meet the high expectations of investors who have been heavily bullish on chip stocks amid the ongoing artificial intelligence surge.
The Palo Alto-based semiconductor giant projected third-quarter revenue of approximately $15.80 billion, slightly above the analysts’ consensus estimate of $15.71 billion, according to LSEG data. However, analysts noted that expectations for Broadcom had already been elevated due to its critical role in AI infrastructure.
“High expectations drove a bit of downside,” said Bernstein analyst Stacy Rasgon, reflecting the sentiment that even marginally positive forecasts may not be enough in the current AI-fueled market climate.
Broadcom provides semiconductors to major clients like Apple and Samsung and supplies advanced networking hardware essential for AI data centers, where massive data transfers are required to power generative AI models. In addition to its networking chips, Broadcom also designs custom AI processors for large cloud providers, offering an alternative to Nvidia’s expensive off-the-shelf chips.
Despite its position in the AI supply chain, Broadcom remains exposed to global trade uncertainties, particularly around U.S. export restrictions aimed at limiting China’s access to advanced technology. “AVGO is ramping two additional customers, but they are still small. So the processor business will grow this year, but at a measured rate,” Morgan Stanley commented.
Rival Marvell Technology, meanwhile, offered a more optimistic outlook last week, forecasting stronger-than-expected second-quarter revenue driven by growing demand for custom chips supporting AI workloads in data centers.
Broadcom briefly crossed the $1 trillion market cap threshold in December, reflecting investor optimism about AI-related chip demand. Its shares have climbed roughly 12% year-to-date. However, its current valuation — with a 12-month forward price-to-earnings ratio of 35.36 — remains significantly higher than Marvell’s 20.63, according to LSEG data.