Broadcom's stock tanked a staggering 15.9% from yesterday's close, hitting $403.01. The company's market cap dropped by over $300 billion in just one day. This marks one of the largest single-day plummets in the history of the U.S. stock market, according to the Financial Times. The crash happened after the company stuck to its previous AI revenue forecast for 2027 ($100 billion) without any upward revision, despite investors expecting a more bullish update. Meanwhile, the financial results beat consensus estimates.
Broadcom expects $29.4 billion in revenue for the current quarter, exceeding consensus estimates ($28.2 billion) but falling short of the most optimistic projections.
"The revenue forecast for artificial intelligence turned out to be slightly overstated. I suspect this was the catalyst for the stock price drop after the market closed," commented Visible Alpha's research head, Melissa Otto.
Broadcom's crash coincided with a time when the chipmaker's stocks were trading at record highs, with a market cap around $2.3 trillion. In the week ending June 3, shares rose over 14%, recovering from a dip in March.
The total market cap of companies in the Philadelphia Semiconductor Index (tracking the 30 largest chip makers) has surged by over $5 trillion in the past two months. Investors have piled into firms selling AI infrastructure, hoping for sustained growth in expenditures over the next two years.
Following Broadcom's plunge on Thursday, shares of other semiconductor companies dropped sharply: Micron (around 10%, losing over $100 billion in market cap in a single day), AMD, Intel, Marvell, and Arm. The exception was NVIDIA—its quotes remained intact as traders bet on it benefiting from Broadcom's weakened position.
The drop in Broadcom's shares also reflected investor disappointment, as they had hoped for a revision of the company's long-term outlook upward. CEO Hock Tan stated in March that he expects over $100 billion in revenue from AI chips by 2027. On Wednesday, he reiterated this forecast without raising it.
"After significant growth fueled by rising expectations for AI chips that Broadcom customizes for other companies, it reported yet another stellar quarter," says The Futurum Group CEO Daniel Newman. In his view, investors likely wanted to hear from Hock Tan that his $100 billion forecast for 2027 had grown into something significantly larger.
In Q2, Broadcom's revenue from chips reached $15 billion, surpassing analyst expectations ($14.8 billion). The total revenue for the quarter ($22.2 billion) matched consensus.
Broadcom sells both hardware and software. The company has become a key player in the AI infrastructure market, competing with NVIDIA and AMD for providing advanced semiconductor devices necessary for training and deploying AI models.
Among the company's clients for custom chips are Google, OpenAI, and Anthropic. However, questions remain about whether tech giants can continue their record spending. This week, Google announced a record capital raise of $80 billion to fund its infrastructure development plans. This is its first stock issuance in over two decades and the largest in history.