Broadcom's modest forecast spooked AI investors. Which stocks were hit?

Shares of chipmakers in trading on Thursday, June 4, came under heavy pressure after Broadcom gave a not too impressive revenue forecast for the quarter and year, writes Barron's. This led investors to question how fast demand for artificial intelligence technology will grow, the publication explains. As a result, the rapid rally of semiconductor companies has come to a pause.

The chipmaker said its revenue from its AI segment could triple to $16 billion in the current quarter, but Wall Street was expecting $17.2 billion. The company's expectations for AI chip sales for the full fiscal year also fell short of analysts' forecasts. This caused Broadcom's stock to fall by more than 14% in trading on Thursday. The company became one of the top outsiders in the S&P 500, Barron's notes.

Other AI-related companies were also hit. Shares of memory makers Micron Technology and Sandisk fell by 7% and 2.2%, respectively. Shares of chip and networking equipment developer Marvell Technology were down more than 2%, but then went into the plus side by 2.5%. Quotes of AI server builder Super Micro Computer were down more than 3% before slowing to 0.5%. Intel shares fell 2%. Shares of Nvidia were losing 0.6%, but recovered the losses and rose by 0.7% relative to the close of the previous day.

The selloff in chip makers' shares followed a powerful rally that put the industry's securities on track for their best annual result since 1999, Bloomberg writes. Although companies continue to benefit from huge investments in artificial intelligence, after such a rapid rally, more and more investors expect a correction or at least a period of consolidation, the agency notes.

The increasing pressure on shares of Broadcom and other semiconductor makers is justified, said KeyBanc Capital Markets analyst John Vinh. "All of these securities have shown very strong growth," he said on CNBC, recalling numerous forecast increases, especially in the segment of artificial intelligence. According to the analyst, the reversal of Broadcom shares after the report indicates that market expectations have already caught up with the chipmaker's rally.

"Market growth since the March lows has been extremely strong. Moreover, it has become almost parabolic, especially in the chip maker sector," Bloomberg quoted Miller Tabak market strategist Matt Maley as saying. - So if Broadcom's report becomes a reason for a pullback that lasts longer than a day or two, it will be good for the stock market."

This article was AI-translated and verified by a human editor