Broadcom is the latest victim of investors punishing high-flying AI companies.
The company fell 8% as investors took in last quarter's strong results but were disappointed with certain aspects of the company's outlook.
Shares initially rose in after-hours Thursday as the company beat on earnings and sales, but swung into the red after CEO Hock Tan took a closer look at the results on a conference call with analysts.
“It was surprising to see a conference call that started with such good numbers and such a great story end with such frustration,” JPMorgan executive director Josh Myers said in a note to clients on Friday.
Here are the positions of the major indexes immediately after the opening bell at 9:30 a.m. ET on Friday::
Other semiconductor stocks also fell slightly, extending a decline in the sector that began after Oracle reported earnings earlier in the week. Here are some of the notable moves.
Broadcom investors appear disappointed that the company did not release a full AI revenue outlook for next year, Deutsche Bank and JPMorgan wrote on Friday. Broadcom said it expects AI semiconductor sales to double to $8.2 billion in the next quarter.
Bespoke Investment Group co-founder Paul Hickey said in a note that investors also appear to be “overwhelmed” by the company's $73 billion backlog of AI products over the next 18 months.
“For some reason some investors took this as 'not good enough,' making the earlier talk today about needing more visibility into F27's AI revenue (not sure why this is suddenly an issue),” JPMorgan's Myers said.
Myers said some investors felt Tan had been more “robust” about the company's performance than expected, citing conversations Tan had with shareholders.
Myers said the stock was already a crowded trade with a popular AI theme, and some may think the market “just needed a breather” from AI trading. Broadcom stock is up more than 56% this year.
Investors have increased pressure on the semiconductor sector in recent months due to concerns about the sustainability of AI deals, resulting in some companies being penalized despite outperforming profits and revenues.
Oracle shares plunged 14% on Thursday as investors reacted to weaker-than-expected quarterly revenue and concerns that the software giant was overspending on AI.
Shares of Meta and Microsoft also fell after the companies reported financial results in October, as both companies pledged to increase investment in AI over the next few years.
