Broadcom Selloff Shows Breaking Records Doesn’t Satisfy ‘Perfection’-Seeking AI Investors

Broadcom, down 13% on Thursday, shed $280 billion in one of the biggest single-day drops in Wall Street history.

What did the chipmaker do to earn this dubious distinction? It reported record quarterly revenue and operating profit, besting analyst expectations in the process, and projected better-than-expected revenue of $29.4 billion this quarter. The ensuing selloff highlighted the increasingly bullish expectations of AI investors, for whom good may not always be good enough.

Playing Against Perfect

The past few weeks have seen investors pour into firms selling artificial intelligence infrastructure, creating one of the year’s most robust rallies. The Philadelphia Semiconductor index, which tracks 30 of the world’s top US-listed chip manufacturers, has gained nearly 29% in the past month and 90% in 2026, reflecting trillions in added market value.

What propelled the recent wave of excitement was ever-higher AI capital spending forecasts: Goldman Sachs now predicts the hyperscalers will collectively allocate $725 billion to capex this year and $4.5 trillion from fiscal 2025 to fiscal 2030. That’s a massive increase from late last year, when the bank forecast $500 million in AI hyperscaler capex in 2026. 

It all left Broadcom, which has rapidly gained ground in the chip race, open to scrutiny for even the slightest concern. For the fiscal second quarter, the company reported a record $22.2 billion in revenue, a 48% year-over-year increase; within that, semiconductor revenue from AI grew an explosive 143% to $10.8 billion. But then come the nitpicks:

• Broadcom expects AI-related chip revenue to climb only 200% to $16 billion in the current quarter, short of Wall Street’s most bullish forecasts. And executives reiterated their expectations for only $100 billion-plus in AI chip revenue in 2027, leading TD Cowen to note that standing pat “in a market environment clamoring for material beats and raises is likely to disappoint.”
• “Broadcom delivered another eye-catching update, but this was a classic case of very high expectations meeting a market that wanted perfection,” Hargreaves Lansdown analyst Matt Britzman wrote. “Investors are punishing anything that falls short of exactly what they wanted to hear.”

Some analysts imply there’s an opportunity to buy the dip. TD Cowen reiterated its buy rating and $500 price target on Broadcom while BNP Paribas Exane raised its price target to $640, both suggesting considerable upside from Thursday’s $418.91 close.

Synchronized Diving: It didn’t help that Broadcom CEO Hock Tan said on an earnings call that Google, a major custom-chip client, will likely diversify its supply chain while Taiwan Semiconductor Manufacturing Co. CEO C.C. Wei warned shareholders that it will be years before global chip supply catches up with demand. In addition to Broadcom, rivals including AMD (down 3.5%), Micron (-7.7%) and Arm (-4.5%) likewise took a dive.