Broadcoms AI Chip Sales Double But Wall Street Still Threw a Tantrum
Wall Street had another one of its famous meltdowns last week and this time Broadcom was the punching bag.
The chipmaker posted earnings that beat expectations reported that AI chip sales are doubling to 8.2 billion in the current quarter and guided for 28% year over year revenue growth. And how did investors respond? They tanked the stock nearly 5%.
Let me get this straight. A company tells you theyre about to double their AI chip business in a market everyone agrees is the future of tech and the reaction is to sell? This is why nobody trusts the stock market anymore. The whole thing runs on vibes and panic instead of actual fundamentals.
Broadcoms CEO Hock Tan laid out numbers that shouldve had investors doing backflips. First quarter revenue guidance of 19.1 billion. AI chip demand through the roof with hyperscalers like Microsoft and Amazon lining up for their custom chips. The companys up 75% year to date for crying out loud. But because some analyst on CNBC muttered something about margin compression suddenly everyones hitting the panic button.
The AI chip market is literally printing money right now and Broadcoms positioned better than almost anyone except maybe Nvidia. These custom ASIC chips theyre making for the big cloud providers are exactly what the market needs as companies look for alternatives to Nvidias increasingly expensive GPUs.
But heres what really happened. Traders who bought in during the recent runup needed an excuse to take profits. Broadcoms stock jumped 15% in the month before earnings on rumors of Microsoft and Amazon partnerships. So when the actual earnings came out even though they were great the “sell the news” crowd decided it was time to cash out. Its not about the companys actual performance its about timing trades and quarterly fund rebalancing and all the other games Wall Street plays.
UBS analyst Timothy Arcuri wrote in a note that the results were “solid” but some commentary about backlog and margins was “muddled enough” to drive selling. Muddled enough. So we’re dumping a stock because the CEOs prepared remarks werent clear enough for your liking? This is the kind of analysis people get paid six figures for?
Bloomberg covered the market reaction noting how tech stocks sold off despite strong fundamentals. The real story here is that Broadcom is winning the AI infrastructure war. While everyone focuses on Nvidia making the flashy GPUs Broadcoms quietly building the custom silicon that powers the backend of every major cloud platform. Thats a stickier more defensible business with better margins once you factor in the switching costs.
But investors wanted Tan to promise even higher margins and give more specific guidance about 2026. When he didnt deliver the exact soundbites they wanted they sold. Never mind that the company just posted its best quarter ever and is guiding for incredible growth. The vibes were off so the stock had to drop.
This is exactly whats wrong with modern markets. Companys crushing it fundamentally but because some traders got spooked by tone and wording during the earnings call the stock drops 5% wiping out billions in market cap. Then those same traders will probably buy back in lower congratulate themselves for “trading the volatility” and pretend like they understand the actual business.
Meanwhile Broadcoms executives are probably sitting in their offices wondering what more they couldve said. Double digit revenue growth. AI business exploding. Major partnerships with the biggest tech companies on the planet. But sure lets sell because the backlog commentary was “muddled.”
The chip shortage narrative that dominated 2024 is shifting to a supply glut narrative for 2025 in some peoples minds. But the AI infrastructure buildout is just getting started. Data centers need to be rebuilt from the ground up to handle these workloads. Thats years of sustained demand not a quick boom and bust cycle.
Broadcom gets this which is why theyre investing heavily in custom chip capabilities. The hyperscalers get this too which is why theyre signing long term contracts. The only people who dont seem to get it are the traders who sold off last week.
Give it a month or two. The stock will recover as people realize the earnings were actually great and the growth trajectory is solid. Then everyone will pretend like the selloff never happened and write articles about how Broadcom is undervalued. Its the same cycle every quarter and its exhausting to watch.
