Broadcom's earnings disappointment triggered a global chip selloff, dragging South Korea's Kospi down 5.5% and sending Samsung and SK Hynix sharply lower, before looping back to pressure Nasdaq 100 futures ahead of Friday's open.
Broadcom's earnings disappointment triggered a global chip selloff, dragging South Korea's Kospi down 5.5% and sending Samsung and SK Hynix sharply lower, before looping back to pressure Nasdaq 100 futures ahead of Friday's open.
Artificial intelligence (AI) chipmaker Broadcom's earnings-induced plunge not only dragged the Nasdaq-100 (NDX) lower on Thursday but also set off a global feedback loop, hammering technology-heavy markets across Asia. The selloff spread to South Korean and Taiwanese semiconductor stocks overnight, only to reinforce bearish sentiment and exert fresh pressure on U.S. equity futures ahead of Friday's session.
Good But Not Good Enough
The NDX pulled back 0.53% on Thursday as momentum in the AI trade faltered following Broadcom's fiscal 2026 second-quarter results. Despite delivering strong growth across several key metrics, the Palo Alto-based chipmaker failed to clear investors' increasingly lofty expectations, underscoring how demanding the market has become toward AI-linked names.
AVGO’s Valuation Premium Cracks
Source: TradingView
The reaction was swift and severe, with roughly $300 billion wiped from Broadcom's market capitalization. The episode served as a stark reminder of the fragility of sentiment surrounding the AI rally and how even a modest disappointment can trigger significant repricing in stocks trading at elevated valuations.
Wall Street analysts largely ignored investor pessimism and doubled down on their bullishness, with many viewing the results as fairly robust and the guidance as conservative. Morgan Stanley semiconductor analyst Joseph Moore reiterated an ‘Overweight’ rating and upped the price target for AVGO stock to $502 from $485.
Broadcom affirmed the AI chip revenue guidance of $100 billion for the fiscal year 2027, which would translate to nearly 80% year over year (YoY) growth over the $56 billion the company predicts for 2026. While calling the FY27 guidance as “very strong,” and factoring in potential upside to the guidance, Morgan Stanley’s Moore said some who were hoping for $150 billion would have been left disappointed. The analyst said these optimistic expectations could materialize but is not a certainty due to the supply-constrained nature of the industry at this point.
Going by Friday’s premarket move (down over 1% on top of Thursday’s nearly 13% slump) in AVGO stock, it appears that investors are still reeling from the disappointment.
AI Contagion Hurts Asia
Broadcom’s sell-off reverberated across Wall Street, with the high-flying South Korean Kospi, which is heavily weighted with two memory chip giants Samsung and SK Hynix, plunged 5.54% on Friday, settling at 8,160.59., off its all-time high of 8,801.49, reached earlier this week. Despite the plunge, the Kospi has nearly doubled this year, riding on the AI optimism.
The two Korean chipmakers paced Friday’s decline: Samsung fell 6.40% and SK Hynix plunged nearly 10%. According to financial research platform Global Markets Investor, these two companies together account for 52% of Kospi market capitalization. The weakness was mirrored in Taiwan's semiconductor complex as well.
Asia Selloff Loops Back
Concerns about AI-sector valuations linger, creating a negative feedback loop that spilled back into the U.S., where Nasdaq futures remained under pressure ahead of Friday's opening bell. With about 2 hours to go for the cash market open, the Nasdaq 100 futures contract was seen shedding about 1%.
Some of the weakness could also trace back to the geopolitical tensions that continue to rage unabated, with the Iran war now entering its 98th day. Israel continued its assault on Lebanon despite announcing a ceasefire on Wednesday following three-way negotiations involving Lebanon and Washington as well.
Meanwhile, a spokesperson of Iran’s Supreme Leader Mojtaba Khamenei reportedly said the draft memorandum of understanding (MoU) being discussed to end the war contained ambiguities that needed to be clarified, casting doubts on any near-term resolution to the broader war in the Middle East.
Investors also looked ahead to the May non-farm payrolls report (NFP) report that is due at 8:30 a.m. ET. Stronger job gains, and/or a rise in inflationary pressure, as reflected by the average hourly earnings growth, could ramp up the odds of a pause, in turn pressuring equities. On the contrary, anemic job gains for May or downward revisions to previous months’ numbers, and/or a slowdown in the average hourly earnings growth could keep rate cut hopes alive, if not in the upcoming June 16-17 Federal Open Market Committee (FOMC) meeting, at least in the subsequent meetings scheduled for the year.
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