Il AI chip rally stumbles over Broadcom, One of the latest big names semiconductors to present quarterly accounts. The American multinational, active in semiconductors and infrastructure software, has delivered strong growth numbers, but not bright enough to satisfy a market now accustomed to demanding perfection. The group closed the second fiscal quarter with revenues of $22,19 billion, up 48% year-over-year, GAAP net income of $9,31 billion and adjusted earnings per share of $2,44. Profitability also remains strong, with adjusted EBITDA of $15,24 billion, equal to 69% of revenue, and free cash flow exceeding $10 billion.
And yet Wall Street looked beyond the profit and loss statementBroadcom shares fell sharply in after-hours trading, with losses ranging from 12% to more than 13%, as indications of its artificial intelligence chip business they did not fuel new expectationsAI semiconductor revenue jumped 143% to $10,8 billion in the second quarter, but the group expects AI-related sales of $16 billion for the current quarter, a figure deemed too conservative compared to the expectations of some analysts.
The reaction was harsh because Broadcom was coming to the test after a strong rise in its stock since the beginning of the year. Investors did not reject the growth, but thelack of a more decisive relaunchIn a market accustomed to rewarding every acceleration of artificial intelligence, confirming prospects may no longer be enough.
The bar for AI remains very high
Chief Executive Officer Hock Tan reiterated the forecast of over $100 billion in revenue from AI semiconductors in 2027 and indicated a capacity of more than 10 gigawatts in the same timeframe. A message that did not surprise the market. Broadcom also predicts total revenues for approximately $29,4 billion in the third fiscal quarter, above the consensus indicated by several estimates, with margins still very high.
The point, however, is that in the AI chip sector expectations run faster than budgetsBroadcom is considered a major beneficiary of the demand for custom accelerators and networking semiconductors, thanks to its relationships with large hyperscale customers like Meta and Google. But competition is growing. Marvell Technology Looks to Expand into Custom Chips for large cloud groups, while Nvidia continues to dominate in graphics accelerators for AI workloads. Even the supply chain remains under observationBroadcom has reassured investors that supplies will be available through 2026 and 2027, but the market remains uncertain about global production capacity.
From Korea to Europe, the cold hits semiconductors.
La Disappointment over Broadcom quickly spread to Asian markets. In South Korea The chip sector has felt the pressure, with Samsung Electronics falling and the Kospi weighed down by cooling sentiment on the technology sector. Artificial intelligence continues to support demand, but investors are no longer willing to forgive less than expected indications.
The movement then transferred to Europe, where sell-offs have hit the entire chip sector. On the Milan Stock Exchange, STM has fallen sharply, down around 5%, while Technoprobe has also fallen. Infineon has also fallen in Frankfurt, as have several companies in the industry listed in Amsterdam, including ASM International, BE Semiconductor, and ASML Holding.
The Broadcom case has thus rekindled the volatility on a sector that in recent months had benefited from the most powerful narrative in the stock markets, that of AI as a structural driver of growth. The problem is not demand, which remains high, but the level of expectationsWhen multiples incorporate near-perfect growth, even solid guidance can become an excuse for profit-taking.
The market demands a new show of strength
Broadcom remains very solid. The group has approved a quarterly dividend of $0,65 per share, continues to generate significant cash flow and maintain a strong growth trajectory. The semiconductor solutions division reached $15 billion in the quarter, representing 68% of revenue, while infrastructure software contributed $7,18 billion.
The message coming from the markets, however, is more severe. At the first slowdown in enthusiasm for AI chips, sales have picked up strongly, reopening the question of the keeping track of sector ratingsAfter months of rallying, exposure to artificial intelligence is no longer enough to continue to rise on the stock market. Better-than-expected numbers, more aggressive prospects, and greater visibility on contracts with large cloud customers are needed.
Broadcom's slowdown doesn't erase the AI boom, but it does remind us how much the the sector has become sensitive to every detail of guidanceFor a market that has already incorporated very ambitious growth scenarios, even a solid quarterly report can prove a test of the rally's sustainability.
