Reuters, June 5: Following the failure of the company’s third-quarter revenue forecast to satisfy investors who have been overly optimistic on chip stocks amid an artificial intelligence boom, Broadcom’s (AVGO.O) new tab shares dropped more than 3% in early trading on Friday.
The company is based in Palo Alto, California, and supplies semiconductors to Samsung (005930.KS) and Apple (AAPL.O). Its chips are essential for the development of generative AI technology because they enable the transfer of large amounts of data across AI data centers through sophisticated networking equipment.
Based on statistics gathered by LSEG, Broadcom projected third-quarter revenue of approximately $15.80 billion, while analysts averaged $15.71 billion.
“High expectations drove a bit of downside,” wrote Stacy Rasgon, an analyst at Bernstein.
Additionally, Broadcom assists in the construction of specialized AI processors for major cloud providers that compete with Nvidia’s (NVDA.O) expensive off-the-shelf chips.
As Washington tries to restrict Beijing’s access to cutting-edge U.S. technology, U.S. President Donald Trump’s changing trade policies and export restrictions have put multinational chipmakers, including Nvidia, at risk.
Br”AVGO is growing its clientele by two, but they are still quite tiny. According to Morgan Stanley, the processor industry will expand this year, albeit slowly.
Rival Marvell Technology (MRVL.O), which opened a new page this week, predicted second-quarter sales above the Wall Street estimate, placing a wager on robust demand for its custom chips that power data center AI workloads.
After predicting a huge increase in demand for chips that fuel artificial intelligence, Broadcom’s valuation surpassed $1 trillion for the first time in December. This year, its shares have increased by almost 12%.
LSEG’s statistics shows that its 12-month ahead price-to-earnings ratio is 35.36, while Marvell’s is 20.63.
