AVGO Stock Jumps to $330 After Hours, As Google Earnings Beat – Is Broadcom Selling Over?
A late boost from Alphabet's earnings has provided some comfort following a brutal selloff, but Broadcom stock has started the year under...
Quick overview
- Broadcom's stock has faced pressure as investors reassess AI valuations and near-term risks, despite a recent boost from Alphabet's earnings.
- Concerns over Broadcom's VMware business and insider selling have added to market caution, highlighting uncertainty in the software segment.
- While Broadcom reported strong operational performance, the stock's selloff reflects a shift in investor focus towards sustainability and risk-adjusted returns.
- The company's valuation is being recalibrated as rising AI infrastructure costs and geopolitical risks prompt a more selective approach to AI investments.
A late boost from Alphabet’s earnings has provided some comfort following a brutal selloff, but Broadcom stock has started the year under pressure as investors reevaluate AI-driven prices and short-term dangers.
A Fragile Opening for an AI Heavyweight
Broadcom entered the new year on uncertain footing, with its share price sliding as confidence across the AI semiconductor complex began to fray. After months of near-uninterrupted gains, investors have turned more defensive, questioning how much of the AI opportunity is already priced into leading infrastructure names.
Earlier this week, AVGO shares fell sharply, briefly dipping below the psychologically important $300 level and threatening to break the 100-day simple moving average. That move raised concerns that the correction could deepen toward lower support zones near $250. While the stock managed to recover into the close, the episode underscored how fragile sentiment has become.
AVGO Chart Daily – The 100 SMA Held As Support
A late rebound after markets closed—sparked by strong earnings from Alphabet—helped stabilize Broadcom shares near $330. The bounce offered short-term relief, but it has not fully erased the broader sense of caution surrounding the stock.
Alphabet’s Earnings Provide a Short-Term Lift
Alphabet’s quarterly results played an important role in shifting the tone. The company beat expectations on fourth-quarter revenue, reinforcing confidence in continued demand for cloud and AI services. Initially, however, markets reacted negatively to Alphabet’s outlook, with GOOGL shares dropping toward $312 as investors digested a massive capital expenditure plan for 2026.
The concern centered on the scale of Alphabet’s planned spending, which highlighted just how capital-intensive the next phase of AI infrastructure buildout may become. That initial selloff later reversed as investors refocused on strong underlying earnings and long-term growth potential.
For Broadcom, Alphabet’s results provided indirect reassurance. As a key supplier of networking, custom silicon, and infrastructure components, Broadcom stands to benefit from sustained hyperscaler investment—even if near-term volatility persists.
VMware Contract Changes Raise New Questions
One of the more concrete issues weighing on Broadcom has been uncertainty surrounding its VMware business. Since acquiring VMware, investors have closely monitored how Broadcom would reshape the software division and extract value from its large installed base.
Recent decisions not to renew contracts with certain cloud partners have unsettled markets. While management has characterized the moves as part of a strategy to prioritize higher-value, more disciplined engagements, the optics have been challenging. Investors worry that customer pushback or slower contract renewals could introduce volatility into a segment that was meant to provide stability alongside cyclical hardware revenues.
At a time when confidence in AI hardware demand is being tested, any ambiguity in the software business adds another layer of risk to Broadcom’s near-term outlook.
Insider Selling Amplifies Caution
Sentiment was further shaken by a wave of insider selling. Chief Executive Officer Hock Tan sold 70,000 shares at an average price of roughly $347, raising about $24 million. While Tan retains a substantial holding of more than 900,000 shares, the timing of the sale—near recent highs—did not go unnoticed.
Additional sales by senior executives, including the CFO and chief legal officer, reinforced the perception that insiders were taking advantage of elevated valuations. Such transactions are often routine and driven by personal financial planning, but in a jittery market they can take on outsized significance.
For investors already questioning AI-related premiums, the insider activity added to the sense that near-term upside may be more limited than previously assumed.
Strong Earnings, Softer Market Reaction
The pullback has been particularly striking given Broadcom’s solid operational performance. The company recently delivered results that exceeded expectations across revenue, earnings, and free cash flow, confirming its status as one of the most efficient operators in the semiconductor industry.
Under different market conditions, those results might have supported further gains. Instead, the stock sold off, reflecting a broader shift in investor priorities. Markets are increasingly focused on sustainability, visibility, and risk-adjusted returns rather than headline growth alone.
This reaction suggests that investors are demanding clearer evidence that today’s AI-driven spending will translate into durable profitability over time.
Margins and Capital Efficiency Under Scrutiny
Broadcom’s fundamentals remain strong, with revenue up more than 28% year over year and free cash flow generation continuing to impress. However, management’s guidance for a modest decline in gross margin has drawn attention.
The margin pressure is partly due to a higher mix of AI-related revenue, which appears to be slightly less profitable than some legacy segments in the near term. While this does not undermine the long-term opportunity, it highlights a key tension: rapid growth does not always coincide with immediate margin expansion.
In a market increasingly focused on return on invested capital, even small changes in margin outlook can have an outsized impact on valuation.
Valuation Returns to Center Stage
At its peak, Broadcom’s valuation assumed sustained hyperscaler spending, limited competitive disruption, and stable margins. As AI infrastructure costs rise and geopolitical and macro risks resurface, those assumptions are being reassessed.
The recent volatility does not signal a breakdown in Broadcom’s business model. Instead, it reflects a recalibration of expectations as investors become more selective about AI exposure.
Broadcom remains a critical player in global technology infrastructure. But the market’s message is clear: leadership and growth alone are no longer enough to justify an unchecked premium without clearer visibility on long-term returns.
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