Broadcom's quarterly results and guidance sailed past Wall Street estimates. It didn't matter.
The chipmaker's shares plummeted 11% on Friday, on pace for their worst day since January, as investors ran for the exits on the artificial intelligence trade. Oracle dropped 4% a day after plunging 10% following its earnings report.
AI has been the driver for the stock market and the broader economy this year, so any negative sentiment has potentially far-reaching consequences. The Nasdaq on Friday fell about 1.4%, and the S&P 500 declined declined by nearly 1%.
The companies getting hit the hardest are the ones most closely tied to AI infrastructure, which has been booming as hyperscalers build out their data centers to try and meet what they describe as insatiable demand for compute-intensive AI services. Broadcom makes custom chips for many of the the largest tech companies, and saw its market cap about double each of the past two years before rallying again in 2025.
"This stock is up 75-80% year to date. You're seeing a little bit of a pullback," Vijay Rakesh, an analyst at Mizuho, told CNBC's "Squawk on the Street" on Friday. "We would be buyers on this pullback."
Mizuho raised its price target on the stock to $450 from $435. It was trading below $364 as of Friday afternoon.
"This is still where the growth is," Rakesh said. "They are still the big supplier to Google on their entire hardware stack, to Meta , to Anthropic and even OpenAI coming down the road."
Broadcom reported revenue growth of 28% during the quarter, largely due to a 74% increase in AI chip sales, to a total of $18.02 billion, topping the $17.49 billion average analyst estimate, according to LSEG. Adjusted earnings per share of $1.95 adjusted topped the $1.86 average estimate.