Broadcom's Record Quarter Couldn't Save Chip Stocks From a Brutal Selloff

After the close on June 3, Broadcom (AVGO) reported fiscal Q2 2026 results (for the quarter ending early May). Revenue and AI semiconductor sales both hit all-time records, and EPS cleared the bar — but Q3 AI chip guidance and the quarter's software revenue fell short of analyst expectations. Over the two trading sessions that followed, AVGO shares declined; on June 5, the Nasdaq Composite closed at 25,709.43, down 4.18% — its steepest single-day loss since the April 2025 tariff shock.^[CNN]

Q2 By the Numbers

Broadcom reported Q2 total revenue of $22.2B, up 48% YoY from roughly $15B in the year-ago period, landing essentially in line with the ~$22.27B consensus. GAAP EPS came in at $1.91; non-GAAP EPS was $2.44, topping the ~$2.40 estimate.^{[Broadcom IR]}

Breaking it down by segment:

• Semiconductor Solutions: Quarterly revenue of $15B, including $10.8B from AI — up 143% YoY, ahead of prior company guidance, and roughly half of total revenue. Networking chips accounted for about 40% of the AI mix. The company disclosed AI semiconductor backlog has surpassed $30B.
• Infrastructure Software: Revenue of $7.18B, up 9% YoY, but below the ~$7.32B consensus. This segment is largely the product of Broadcom's ~$69B acquisition of VMware in 2023.^[TechTimes]
• Cash Flow & Dividend: Free cash flow of $10.26B, equal to roughly 46% of revenue. The company maintained its quarterly dividend of $0.65 per share, payable June 30.

Guidance and Management Commentary

For fiscal Q3, Broadcom guided to total revenue of $29.4B — up 84% YoY — with AI semiconductor revenue projected to exceed $16B, which would represent growth of more than 200% YoY. Strong as that trajectory is, the AI figure fell short of the ~$17.2B analysts had been modeling.^[StockTitan]

On the earnings call, CEO Hock Tan said the company now serves six core custom chip customers — including Anthropic, Google, Meta, and OpenAI — as the primary engines of AI revenue growth. He expressed confidence the momentum would carry into FY27 and reaffirmed the company's target of more than $100B in AI semiconductor revenue for that year. Several financial outlets noted that the market's negative reaction stemmed partly from Broadcom reaffirming rather than raising that long-term target, alongside the software miss.^[CNBC]

Stock Reaction and Analyst Takes

AVGO shares fell as much as 15% intraday on June 4 and closed down 7.9% on June 5. Selling pressure swept across the semiconductor supply chain: Micron (MU), a key HBM supplier for AI accelerators, dropped 13.3% on June 5; Nvidia (NVDA) fell 6.2%; AMD, Intel (INTC), and other chip names posted double-digit losses.^{[24/7 Wall St.]}

Despite the selloff, several banks lifted their price targets on AVGO post-earnings. KeyBanc raised its target from $500 to $575; Bernstein moved from $525 to $550; Mizuho went from $480 to $530; Goldman Sachs raised from $500 to $525; and BofA reiterated Buy while bumping its target from $450 to $530.^{[Yahoo Finance]}

Macro Backdrop and What to Watch

On the same day, the Labor Department's May nonfarm payrolls print came in well above expectations, pushing Treasury yields higher and shifting market expectations around the Fed's rate path — adding another headwind for richly valued tech stocks.^[CNBC]

Looking ahead: May CPI is due June 10, followed by May PPI on June 11. Forward capex commentary from Nvidia, AMD, and TSMC (TSM) — along with cloud spending plans from Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), and Meta — will be the next meaningful data points on the trajectory of AI infrastructure demand.

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