Broadcom Sparks AI Stock Sell-Off Despite Strong Jobs Data
Broadcom’s unchanged AI revenue guidance for 2027 triggered a sharp sell-off in AI and tech stocks last week, despite strong jobs data and S&P 500 records. The Magnificent 7 underperformed, though broader tech and semiconductor sectors remain strong year-to-date, with earnings growth projected at 58.1% for Q2 and 44.1% annually." "article": "Stocks in artificial intelligence and technology sectors experienced a sharp decline last week, driven primarily by Broadcom’s (AVGO) quarterly earnings report. Despite exceeding expectations for sales and earnings, Broadcom left its 2027 AI revenue guidance unchanged, disappointing investors who anticipated a stronger outlook amid rapid AI growth. The Magnificent 7 underperformed, with an average stock price drop of 0.5%, though the decline was concentrated in tech and AI-related companies. The iShares Future AI and Tech ETF (ARTY) fell 12.5% from its peak but remains 47% higher year-to-date, while the semiconductor sector, including Broadcom, is up over 33% for the year. The tech sector’s earnings growth remains robust, with FactSet projecting 58.1% year-over-year growth in Q2 and 44.1% for the full year. While short-term stock movements may not align with earnings, long-term price growth is typically fueled by sustained profitability. Economically sensitive cyclical stocks underperformed last week, but this shift does not indicate a recession risk, as odds of a US downturn dropped below one-in-five. Strong labor market data, including a 172,000 increase in nonfarm payrolls (beating expectations of 88,000), supported this outlook, with unemployment holding steady at 4.3%. The prime-age employment-to-population ratio (25–54 years) remained stable, reinforcing labor market resilience, while continuing claims for unemployment benefits declined, signaling easier job transitions. Alternative data from LinkUp, tracking job openings at top global employers, showed no recent improvement, though broader labor market trends are still evolving. This week, investors will focus on Wednesday’s May consumer inflation (CPI) report, expected to reflect higher energy costs linked to geopolitical tensions in the Middle East.
Stocks in artificial intelligence and technology sectors experienced a sharp decline last week, driven primarily by Broadcom’s (AVGO) quarterly earnings report. Despite exceeding expectations for sales and earnings, Broadcom left its 2027 AI revenue guidance unchanged, disappointing investors who anticipated a stronger outlook amid rapid AI growth. The Magnificent 7 underperformed, with an average stock price drop of 0.5%, though the decline was concentrated in tech and AI-related companies. The iShares Future AI and Tech ETF (ARTY) fell 12.5% from its peak but remains 47% higher year-to-date, while the semiconductor sector, including Broadcom, is up over 33% for the year. The tech sector’s earnings growth remains robust, with FactSet projecting 58.1% year-over-year growth in Q2 and 44.1% for the full year. While short-term stock movements may not align with earnings, long-term price growth is typically fueled by sustained profitability. Economically sensitive cyclical stocks underperformed last week, but this shift does not indicate a recession risk, as odds of a US downturn dropped below one-in-five. Strong labor market data, including a 172,000 increase in nonfarm payrolls (beating expectations of 88,000), supported this outlook, with unemployment holding steady at 4.3%. The prime-age employment-to-population ratio (25–54 years) remained stable, reinforcing labor market resilience, while continuing claims for unemployment benefits declined, signaling easier job transitions. Alternative data from LinkUp, tracking job openings at top global employers, showed no recent improvement, though broader labor market trends are still evolving. This week, investors will focus on Wednesday’s May consumer inflation (CPI) report, expected to reflect higher energy costs linked to geopolitical tensions in the Middle East.
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