Shares of Broadcom Inc. (AVGO) fell on Friday, underperforming the broader semiconductor industry and stock market despite reporting stronger-than-expected earnings after the bell on Thursday.
The stock dropped as much as 4.5% during the session, giving back some of its recent gains. While Broadcom beat revenue expectations for its fiscal second quarter, the results failed to dazzle investors who had bid up the stock to record highs in the lead-up to the report.
The company reported $15 billion in revenue for the quarter, up 20% from a year ago and slightly above the $14.96 billion consensus estimate. It also guided for $15.8 billion in revenue for the current quarter, just a hair ahead of the $15.7 billion analysts were expecting.
In other words, the results were solid, but not spectacular. And after a 78% rally off the April lows, expectations were sky-high. The stock closed at a record on Wednesday, so some profit-taking was to be expected.
Broadcom has been a major beneficiary of the artificial intelligence boom. The company designs networking products that help connect AI chips inside data centers. It also works with major tech firms like Alphabet Inc. (GOOGL) and Meta Platforms Inc. (META) to design custom AI chips, giving them an alternative to Nvidia Corp.’s (NVDA) market-dominating GPUs.
That exposure to AI has helped push Broadcom’s market cap north of $1 trillion, making it one of the most influential stocks in major indexes and ETFs.
Broadcom is currently the sixth-largest holding in the SPDR S&P 500 ETF Trust (SPY), with a weight of 2.4%. It’s the fifth-largest holding in the Invesco QQQ Trust (QQQ), at 5%.
It also has heavy representation in semiconductor-focused funds, making up 10.2% of the VanEck Semiconductor ETF (SMH) and 10.1% of the iShares Semiconductor ETF (SOXX).
Investors looking for a more aggressive play on the stock have also been using the Defiance Daily Target 2X Long AVGO ETF (AVGX), which offers 2x leveraged exposure to Broadcom. That fund currently has $93 million in assets under management.
Despite Friday’s dip, Broadcom remains a key AI bellwether and a major driver of performance for many popular ETFs.
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