AVGO Stock Eyes $300 as China Risk and Valuation Pressure Resurface in AI Trade
Broadcom shares fell sharply as renewed China-related concerns in the AI hardware space reignited valuation fears, overshadowing solid...
Quick overview
- Broadcom shares fell 3.3% amid renewed concerns over China-related payment terms for AI hardware, overshadowing strong earnings.
- The semiconductor sector experienced a broad decline as investors reassessed geopolitical risks, with major chipmakers like Nvidia and AMD also seeing losses.
- Despite reporting strong quarterly results, Broadcom's stock faced a sharp pullback, highlighting a market shift where strong performance is no longer enough to maintain high valuations.
- Concerns over profitability and rising AI infrastructure costs have led investors to reevaluate Broadcom's market valuation, indicating a demand for clearer visibility on margins and returns.
Broadcom shares fell sharply as renewed China-related concerns in the AI hardware space reignited valuation fears, overshadowing solid earnings and strong long-term fundamentals.
China Payment Headlines Weigh on AI Hardware Sentiment
Broadcom shares came under renewed pressure on Thursday as a Reuters report detailing tighter payment terms for Nvidia’s AI chips in China rippled through the semiconductor sector. The report said Nvidia is now demanding full upfront payment for its H200 data-center processors from Chinese customers, while some firms were reportedly asked to pause orders as regulators consider approvals.
That development quickly shifted sentiment across AI and data-center exposed stocks. Although Nvidia CEO Jensen Huang stated at CES that demand remains “quite high,” the combination of regulatory uncertainty and stricter commercial terms raised fresh questions about China’s role in sustaining AI hardware growth.
Broadcom, which sits squarely in the same ecosystem through networking silicon, custom accelerators, and data-center infrastructure, was caught in the downdraft. AVGO shares fell 3.3% in morning trade, extending an already fragile decline.
Semiconductor Stocks Slide in Unison
The reaction was not isolated. Chipmakers broadly moved lower as investors reassessed geopolitical and demand risks:
- Broadcom (AVGO): -3.3%
- Nvidia (NVDA): -1.5%
- AMD (AMD): -1.7%
- Intel (INTC): -2.9%
- iShares Semiconductor ETF (SOXX): -2.1%
The synchronized move highlighted how tightly correlated AI infrastructure names remain, particularly when headlines touch China exposure—a recurring source of volatility for the sector.
Earnings Beat Fails to Stabilize Broadcom Shares
What made Broadcom’s decline more notable was its timing. Just days earlier, the company delivered a strong quarterly earnings report that exceeded expectations across nearly every major metric. Revenue, earnings per share, and margins all came in ahead of forecasts, reinforcing Broadcom’s position as a core beneficiary of AI-driven infrastructure spending.
Yet the market response was unforgiving. Instead of extending its rally, Broadcom shares reversed sharply post-earnings and fell an additional 4.5% on Wednesday before Thursday’s continuation lower.
The reaction underscored a shifting market dynamic: strong results are no longer enough when expectations are stretched and valuations leave little room for error.
A Sharp Pullback After a Historic Rally
Heading into earnings, Broadcom had been one of the standout performers in global equities. Enthusiasm around AI networking, hyperscaler demand, and long-term infrastructure investment pushed the stock to a record high above $414.
That optimism unraveled quickly. Within days, AVGO slid to roughly $326—representing a drawdown of about 21% from its peak.
Technical Breakdown Raises Caution
From a chart perspective, the move carried weight. Broadcom broke below its 20-month simple moving average, a level often viewed as a long-term trend indicator. That average has now flipped into resistance, reinforcing concerns that the stock may be entering a deeper corrective phase rather than a routine pullback.
AVGO Chart Weekly – The 20 SMA Has Been Broken
Fundamentals Remain Strong, but Margins Come Into Focus
Operationally, Broadcom’s quarter was difficult to criticize. Revenue rose more than 28% year over year to $18.02 billion, while adjusted EBITDA and free cash flow margins exceeded expectations. Inventory management improved, and execution across core businesses remained solid.
However, management introduced a note of caution around margins. Executives guided for a modest decline in gross margin in the upcoming quarter, largely due to a higher mix of AI-related revenue. While AI is driving growth, it appears—at least in the near term—to be slightly less profitable than some legacy segments.
In a market environment where investors are increasingly sensitive to profitability and return on capital, even small margin headwinds can trigger outsized reactions.
Valuation Reasserts Itself as the Central Issue
At the heart of the selloff is valuation. Broadcom’s market capitalization had climbed toward $2 trillion, placing it among the most richly valued names in the semiconductor sector. On forward estimates, the stock trades at elevated multiples that assume sustained growth, resilient margins, and continued hyperscaler spending.
As AI infrastructure costs rise and competition intensifies, investors are beginning to reassess how durable peak profitability really is. The selloff reflects less a loss of confidence in Broadcom’s business and more a recalibration of how much certainty the market is willing to pay for.
Broader Market Signals: Rotation, Not Collapse
Broadcom’s weakness has added pressure to the Nasdaq, which has been weighed down by profit-taking in high-multiple AI stocks. In contrast, the Dow has held up relatively better, benefiting from rotation into industrials and more defensive names.
Encouragingly, Micron’s strong earnings provided a counterweight, suggesting that semiconductor fundamentals remain intact even as volatility increases. Whether that support is enough to stabilize sentiment across AI hardware remains uncertain.
What Investors Are Saying Now
The takeaway from recent price action is becoming clearer. Markets are no longer rewarding growth at any price. Instead, they are demanding clearer visibility on margins, returns, and exposure to geopolitical risk.
Broadcom remains a high-quality franchise at the center of global data-center infrastructure. But the recent decline suggests that its AI premium is now being actively questioned rather than blindly embraced.
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
Save