Broadcom Leads Tech Slump as AI Forecasts Fail to Satisfy Investors

Broadcom shares plunged as much as 12% following its second-quarter earnings report, as a cautious software outlook and stagnant AI chip forecasts overshadowed a doubling in AI-related revenue. Despite the stock decline, CEO Hock Tan reported that revenue from custom artificial intelligence chips reached $10.8 billion during the quarter. The company maintained its annual AI revenue guidance, which disappointed investors looking for an upward revision similar to those seen from peers like Nvidia.

The sell-off in Broadcom triggered a broader retreat across the semiconductor sector, dragging down shares of Micron Technology and ARM Holdings. Market sentiment toward chipmakers has turned increasingly volatile as investors weigh massive infrastructure spending against the timing of actual software-driven returns. While Broadcom's hardware division remains a critical supplier for hyper-scale data centers, its legacy software business performed below analyst expectations, contributing to the downward pressure on the stock.

The volatility spread to Asian markets, where SoftBank Group shares fell 6% as the tech sell-off accelerated globally. Samsung and other regional electronics giants also faced selling pressure after the Nasdaq posted a decline of more than 4.5% in the preceding week. The divergent performance between high-flying AI hardware names and struggling software segments has created the widest performance gap on record between the two tech sub-sectors, highlighting a growing 'wait-and-see' approach among institutional investors.