Broadcom is poised to lose over $300 billion in market value following a disappointing AI revenue forecast that failed to meet investor expectations. The company's shares fell 14% as it reiterated its $100 billion AI revenue target for fiscal 2027, rather than raising it, amid fierce competition and high market expectations.
The semiconductor giant's second-quarter revenue of $22.19 billion missed analyst expectations, and its current-quarter AI chip sales forecast of $16 billion fell slightly below Wall Street estimates. Despite this, the $16 billion forecast represents a significant increase from last year's $5.2 billion, highlighting Broadcom's rapid growth in the AI chip sector. However, analysts noted that the company's substantial stock gains have left little room for error.
The disappointing results triggered a broader selloff in chip stocks, with Marvell Technology down nearly 5% and other major players like AMD, Intel, Micron, and Qualcomm experiencing declines between 1.6% and 6.5%. This comes after a period of gains driven by positive announcements at the Computex event.
“It is a classic case of very high expectations meeting a market that wanted perfection.”
Matt Britzman, Senior Equity Analyst at Hargreaves Lansdown
Broadcom CEO Hock Tan expressed confidence in the company's long-term prospects, stating that they expect to ship over 10 gigawatts of AI chips in 2027, a slight increase from previous estimates. The company has also secured its memory chip supply for 2026 and 2027, providing some reassurance amid the current supply crunch.
Despite the setback, at least 22 analysts have raised their price targets for Broadcom's stock, with the median view now at $500, representing a more than 4% upside from the last close. The stock currently trades at 29.90 times its forward earnings estimates, compared to Marvell's 61.70 multiple and the broader S&P 500 index's 27.94.
Background
Broadcom's recent challenges highlight the volatile nature of the semiconductor market, where high expectations can lead to significant market fluctuations. The company's rapid growth since the launch of ChatGPT in 2022 has made it a key player in the AI infrastructure space, but it now faces increased scrutiny from investors and analysts alike.
Looking ahead, analysts suggest that Broadcom's stock may stabilize over the next few quarters, with renewed interest expected as the company approaches its 2027 targets. Investors will be closely watching the company's ability to navigate competition and maintain its growth trajectory in the evolving AI chip market.
