{"id":518640,"date":"2026-06-04T17:27:25","date_gmt":"2026-06-04T17:27:25","guid":{"rendered":"https:\/\/www.europesays.com\/ie\/518640\/"},"modified":"2026-06-04T17:27:25","modified_gmt":"2026-06-04T17:27:25","slug":"broadcom-is-drowning-in-ai-orders-why-arent-investors-impressed","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/ie\/518640\/","title":{"rendered":"Broadcom Is Drowning in AI Orders. Why Aren’t Investors Impressed?"},"content":{"rendered":"

Broadcom (AVGO)<\/a>\u2018s stock took a 14.0% haircut before the market even opened on Thursday. You\u2019d think the company had just guided to a collapse. Instead, the CEO was talking about \u201caccelerating growth in AI semiconductor revenue<\/a>\u201d and demand that is \u201csimply insatiable.\u201d So what exactly is going on here? The market seems to have decided that Broadcom\u2019s AI boom, as spectacular as it is, comes with a catch.<\/p>\n

An Unbelievable AI Haul<\/b><\/p>\n

Let\u2019s be clear: the AI numbers are staggering. The company\u2019s AI semiconductor revenue hit $10.8 billion this quarter alone, a 143% jump from a year ago. And the pipeline is overflowing. Management reported taking in over $30 billion in new AI bookings during the quarter, nearly triple what it actually shipped. The forecast for next quarter is even bigger: $16.0 billion in AI chip sales. Even the legacy non-AI semiconductor business is showing signs of life, with bookings exceeding shipments in what management called a \u201cclear indication we are on the path towards a\u00a0full cyclical recovery<\/a>.\u201d<\/p>\n

\"\"Image by PublicDomainPictures<\/a> from Pixabay<\/a><\/p>\n

The Price Of Growth<\/b><\/p>\n

Here\u2019s the rub. All that custom silicon work for the world\u2019s biggest AI players carries a different financial profile. On the earnings call, management confirmed what analysts have been quietly worrying about: the custom chips, or ASICs, that are driving this explosion have \u201clower margins.\u201d The CFO stated that as these sales \u201ccontinue to accelerate, there will be pressure overall on margins.\u201d Gross margin already declined by 230 basis points year-over-year to 77.1% as the mix shifts increasingly toward semiconductor products. That wasn\u2019t just talk \u2013 the company explicitly guided for its consolidated gross margin<\/a> to fall further, to \u201capproximately 74%\u201d next quarter.<\/p>\n

This isn\u2019t Broadcom\u2019s only margin headwind \u2013 Broadcom\u2019s Hidden Risk: VMware Under Pressure?<\/a><\/p>\n

Upside, With A Caveat<\/strong><\/p>\n

Before writing off the margin compression as pure bad news, consider what\u2019s driving it. When an AI model reaches massive scale, running it on general-purpose GPUs from the likes of Nvidia (NVDA)<\/a> becomes incredibly expensive. Hyperscalers are co-designing ASICs with Broadcom precisely because they can strip out any component a specific AI model doesn\u2019t need, massively reducing power consumption and cost per query. Training a model happens once \u2013 inference runs forever, at enormous volume. Thinner margins on each chip matter a lot less when the order quantities are effectively endless. And once a hyperscaler has co-designed a custom chip with Broadcom, switching costs become prohibitive \u2013 the engineering relationship itself becomes a moat.<\/p>\n

The question, then, is not whether the AI business is real. It clearly is. The question is whether volume and lock-in can compensate for thinner margins over time. This quarter\u2019s stock reaction suggests investors aren\u2019t yet convinced \u2013 and that shifts where the scrutiny needs to land. Forget the headline revenue number for a moment. The figure that will tell the real story next quarter is that consolidated gross margin. Is 74% a stable new floor, or just the next step down? Separately, see Broadcom\u2019s Hidden Risk: VMware Under Pressure?<\/p>\n

So, What Should You Do?<\/b><\/p>\n

Reacting to a single earnings print is its own kind of risk. The\u00a0Trefis High Quality (HQ) Portfolio<\/a> takes the other side of that bet: 30 quality names, sized and re-balanced with discipline, and a track record of outpacing the S&P 500, S&P Mid-cap, and Russell 2000. When it comes to protecting and growing wealth over the long term, a disciplined portfolio approach pays much better than concentrated single stock bets.<\/p>\n","protected":false},"excerpt":{"rendered":"Broadcom (AVGO)\u2018s stock took a 14.0% haircut before the market even opened on Thursday. You\u2019d think the company…\n","protected":false},"author":2,"featured_media":518641,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[261],"tags":[291,289,290,110148,224240,85691,18,66872,19,17,55699,82],"class_list":["post-518640","post","type-post","status-publish","format-standard","has-post-thumbnail","category-artificial-intelligence","tag-ai","tag-artificial-intelligence","tag-artificialintelligence","tag-avgo","tag-avgo-earnings","tag-avgo-stock","tag-eire","tag-goog","tag-ie","tag-ireland","tag-nvda","tag-technology"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@ie\/116693018572162560","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/518640","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=518640"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/518640\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/518641"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=518640"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=518640"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=518640"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}