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(Bloomberg) — Wall Street drove a rotation out of chipmakers into several other industries after Broadcom Inc.’s underwhelming outlook tested the artificial-intelligence trade that has powered the market.
A blistering run in semiconductor companies from war-driven lows took a breather as investors hoping for a stronger forecast from Broadcom were disappointed by guidance that wasn’t enough to buoy sentiment, sending the shares down 15%. A key chip-sector gauge lost 3%. Despite weakness in the high-profile group, about 350 firms in the S&P 500 rose. The Dow Jones Industrial Average climbed toward a record.
The selloff in chipmakers came on the heels of a surge that put the industry’s stocks on track for their best year since 1999. While those companies continue to benefit from the flood of cash being spent on AI, calls for a pullback or consolidation have emerged after such a powerful advance.
“The rally off the March lows has been an extremely strong one. In fact, it has been parabolic, especially for the chip stocks,” said Matt Maley at Miller Tabak. “Therefore, if the earnings report from Broadcom is the catalyst for a pullback that lasts more than a day or two, it would actually be healthy for the stock market.”
