Broadcom Rally Stalls Despite Booming AI Sales Promise

Broadcom (AVGO:US) shares retreated from record highs despite the company’s management saying that sales tied to artificial intelligence (AI) will double this year.

Shares in the chipmaker added almost 29% in the month of May but with reference to year-to-date share valuation, the stock was up nearly 50% at one point during the month, notably due to the fact that investors rushed to increase exposure to AI-linked stocks.

Broadcom reported stronger-than-expected earnings last week, but this was likely already priced in given the strong run-up in shares recently. For its second fiscal quarter, Broadcom reported a profit per share of $10.32 on revenue of $8.73 billion.

Analysts were hoping for a profit of $10.15 per share on sales of $8.72 billion. While Nvidia (NVDA:US) delivered blowout guidance for the ongoing quarter, Broadcom guided for “just” $8.85 billion in quarterly sales, slightly ahead of the Street at $8.76 billion.

“Broadcom’s second quarter results were driven by demand for next generation technologies from hyperscale, while enterprise and service providers continued to sustain,” said Hock Tan, President and CEO of Broadcom Inc.

“Our third quarter outlook projects year-over-year growth, reflecting continued leadership in networking as we support a measured ramp into large scale AI networks.”

On the earnings call, the company said it expects AI revenue to exceed $1 billion in the third fiscal quarter. This commentary was not enough to lift shares.

Still, Broadcom shares trade nearly 45% higher year-to-date. Senator Tommy Tuberville and Representative Daniel Goldman were buying the stock in 2023, while Representative Ro Khanna purchased corporate bonds.