A blockbuster set of artificial intelligence numbers wasn't enough to satisfy Wall Street on Thursday. Broadcom shares plunged nearly 14% on June 4, dragging the Nasdaq Composite down 0.76% and clipping the S&P 500 by 0.14%, even as the Dow Jones Industrial Average climbed 1.08% on a rotation into defensives and easing oil prices. The pullback halted what had been an almost uninterrupted AI-fueled rally that carried major indexes to record closes earlier in the week.
The catalyst was Broadcom's fiscal second-quarter report, released after Wednesday's close, which paired one of the strongest growth prints in the chip cycle with a forward outlook that fell short of elevated expectations. Total revenue reached $22.19 billion, up 48% year-over-year, while adjusted earnings of $2.44 per share topped consensus. Most striking, AI semiconductor revenue jumped 143% to $10.8 billion — by any historical standard, an extraordinary result.
Why a Beat Triggered a Sell-Off
The problem was guidance. Broadcom set its AI chip revenue target at $16 billion, below the roughly $17.2 billion analysts had penciled in. Just as important, CEO Hock Tan declined to raise the company's 2026 AI semiconductor outlook, despite a quarter that arguably warranted it. For a stock priced on accelerating growth, holding the line was effectively a downgrade.
Wall Street took the cue. Macquarie cut Broadcom from Outperform to Neutral and lowered its price target to $437 from $513, citing the narrower-than-hoped runway in the back half. After-hours trading saw shares fall 12%, with selling extending into the regular session.
Chip Sector Caught in the Downdraft
The damage radiated through the broader semiconductor complex. Micron Technology and Marvell Technology — the latter only days removed from a 23% surge on its Teralynx T100 launch — both finished lower as investors questioned whether AI infrastructure spend forecasts had run ahead of customer commitments.
Super Micro Computer dropped 7.2% after Gorilla Technology Group disclosed a $2 billion AI infrastructure supply agreement with the server maker to support Yotta Data Services' project in India. While the headline was constructive, traders interpreted the contract as confirmation that supply, not demand, has become the binding question for the AI buildout — and a reminder that Super Micro's pricing power may be more contested than the stock's earlier run implied.
Dow Holds Up on Oil Relief
Underneath the tech weakness, the day's tape told a different story for the rest of the market. Oil prices eased after the U.S.-Iran fire exchanges that drove crude back toward $100 earlier in the week showed signs of de-escalation. That offered relief to transportation, industrial and consumer-facing names, lifting the Dow by 1.08% even as growth stocks struggled.
The split performance reflects a broader rotation question that has dogged investors since the AI rally accelerated in late May. With the S&P 500 having closed above 7,600 for the first time on Tuesday, the multiples on AI-exposed names had compressed the margin for error — exactly the setup Broadcom's guidance walked into.
What to Watch
Attention now turns to Friday's nonfarm payrolls report, which will follow ADP's stronger-than-expected May print of 122,000 private jobs added — the best month since January 2025. A firm employment number would complicate the rate-cut narrative heading into the Federal Reserve's June 16-17 meeting, where the Committee currently holds the federal funds rate at 3-1/2 to 3-3/4 percent. For chip investors, the near-term test is whether Broadcom's forecast represents a one-off disappointment or the first crack in the AI capex story.
Sources: CNBC, TheStreet, The Motley Fool, Yahoo Finance, GuruFocus, 24/7 Wall St.