AVGO Stock Soars on Big Tech Data-Center Spending Hike but Faces Resistance and VMware Uncertainty
Broadcom shares are rebounding alongside the semiconductor sector as AI data-center spending expectations improve, though investors remain..
Quick overview
- Broadcom shares have rebounded as investor confidence in AI data-center spending improves, despite ongoing concerns about margins and valuation.
- The stock experienced a significant recovery, climbing above $350 after briefly dipping below $300, reflecting renewed optimism in the semiconductor sector.
- Key drivers of this momentum include strong capital expenditure signals from major hyperscalers like Amazon and Alphabet, indicating ongoing AI infrastructure expansion.
- However, uncertainty surrounding Broadcom's VMware integration strategy and potential impacts on recurring revenue continues to create caution among investors.
Live AVGO Chart
[[AVGO-graph]]
Broadcom shares are rebounding alongside the semiconductor sector as AI data-center spending expectations improve, though investors remain cautious about margins, valuation, and VMware-related uncertainty.
Early-Year Volatility Gives Way to a Short-Term Rebound
Broadcom stock began the year under pressure, briefly falling below the $300 level as investors reassessed valuations across the semiconductor sector amid broader technology-market volatility. Concerns centered on whether AI-driven pricing enthusiasm had moved ahead of near-term earnings visibility, prompting a temporary pullback across several hardware leaders.
In the past two sessions, however, sentiment has shifted noticeably. Broadcom rose roughly 7% on Friday and added more than 3.5% at the start of the new week, leading gains among major semiconductor names. The rebound reflects renewed investor confidence in the long-term demand outlook for AI-related infrastructure, particularly networking, connectivity, and custom silicon solutions—areas where Broadcom maintains a dominant position.
A Strong Opening to the Week
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 (red) which has held and we’re seeing a strong rebound again. A break below the 100 SMA would have deepened the correction toward lower support zones near $250. While the stock managed to recover, the episode underscored how fragile sentiment has become.
AVGO Chart Daily – The 100 SMA Held As Support
However the rebound has helped stabilize Broadcom shares which climbed above $350 on Monday. The bounce offered relief, but it has not fully erased the broader sense of caution surrounding the stock.
Hyperscaler Spending Signals Drive Sector Momentum
A key catalyst behind the rally has been renewed visibility into hyperscaler capital-expenditure plans. Amazon recently indicated that its capital spending could rise more than 50% this year, while Alphabet delivered similarly strong investment signals earlier in the week. These announcements reinforced expectations that AI data-center expansion remains in an early phase rather than nearing a peak.
As a result, investors rotated back into hardware-focused technology names expected to benefit most directly from infrastructure build-outs. Nvidia and AMD also moved higher, but Broadcom outperformed both, gaining roughly 11% over two trading sessions, reflecting its leverage to networking chips, custom accelerators, and switching solutions that form the backbone of modern AI clusters.
The rotation also coincided with a partial reversal of the early-year “SaaSpocalypse” sell-off in software, as analysts argued that large-cap technology valuations had become oversold. That broader stabilization in the tech sector provided an additional tailwind for semiconductor names.
VMware Contract Strategy Creates Near-Term Uncertainty
Despite improving sentiment around AI demand, one of the more tangible risks weighing on Broadcom remains uncertainty surrounding its VMware business. Since completing the VMware acquisition, investors have closely tracked how the company plans to restructure the software division and integrate it into its broader enterprise-infrastructure strategy.
Recent decisions not to renew certain contracts with cloud partners have introduced fresh questions. Management has framed these moves as part of a disciplined effort to prioritize higher-value, longer-term engagements, but the shift has unsettled some customers and investors concerned about potential disruption to renewal cycles.
Because VMware was expected to provide a more stable, recurring-revenue complement to Broadcom’s cyclical semiconductor business, any perception of contract friction or slower adoption adds another layer of short-term uncertainty. Markets tend to react quickly to any signal that recurring software revenue may become less predictable, even if the longer-term strategy remains intact.
Strong Financial Performance Meets a More Demanding Market
Broadcom’s recent pullback earlier in the year was notable given its continued strong operating performance. The company delivered results that exceeded expectations across revenue, earnings, and free cash flow, reinforcing its reputation as one of the most efficient operators in the semiconductor industry.
However, market dynamics have shifted. Investors are now placing greater emphasis on sustainability, capital efficiency, and risk-adjusted returns rather than headline growth alone. Even companies reporting strong earnings can face valuation pressure if future margin trajectories or capital-allocation visibility become less certain.
This environment helps explain why Broadcom’s solid results did not prevent earlier volatility in the stock.
Margins and Valuation Remain Key Focus Areas
Broadcom’s fundamentals remain robust, with revenue growth exceeding 28% year over year and continued strong free-cash-flow generation. Nevertheless, guidance pointing to a modest decline in gross margin has drawn investor attention. The change is partly tied to the growing contribution of AI-related products, which may initially carry slightly lower margins as production scales.
At the same time, the stock’s prior valuation had already incorporated expectations of sustained hyperscaler spending, stable profitability, and limited competitive disruption. As global macro risks, geopolitical tensions, and interest-rate uncertainty persist, investors are reassessing how much premium they are willing to pay for AI-exposed companies.
Cautious Outlook: Strong Positioning, but Expectations Are Resetting
Broadcom remains a critical enabler of global AI infrastructure, and the latest hyperscaler spending signals suggest long-term demand remains firmly intact. The recent rebound indicates that investors are once again recognizing the company’s strategic importance within the semiconductor ecosystem.
However, the broader market environment has become more selective. Questions surrounding VMware integration, margin trends, and the timing of returns from massive AI infrastructure investments are likely to keep volatility elevated in the near term. While the long-term growth narrative remains compelling, the path forward may involve periodic reassessments as investors seek clearer confirmation that today’s spending surge will translate into sustained profitability.
- 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
- Read our latest reviews on: Avatrade, Exness, HFM and XM
Save