Broadcom’s Selloff Shows the New Rule of AI Stocks: Great Isn’t Good

Broadcom (NASDAQ:AVGO | AVGO Price Prediction) beat both lines last week and still got punished, which shows how this AI cycle now grades the report card.

Broadcom is the second-largest AI chip franchise behind NVIDIA (NASDAQ:NVDA), supplying custom accelerators and networking silicon to hyperscalers. CEO Hock Tan has been guiding the Street toward $56 billion in AI semiconductor revenue this fiscal year and over $100 billion by 2027. Expectations have been carrying much of the stock price.

A beat that wasn’t enough

Q2 results were objectively excellent. Revenue of $22.19 billion rose 47.9% year over year, AI semiconductor revenue hit $10.80 billion on 143% growth, and free cash flow set a record at $10.26 billion. Operating margin printed at 67%. Tan said “demand for XPUs and networking is simply insatiable” and disclosed over $30 billion in AI bookings against the quarter’s shipments.

The problem was the next…