CHENNAI: Broadcom shares (AVGO.O) fell nearly 5% on Friday as the semiconductor maker's quarterly revenue forecast fell short of investors' lofty expectations following bigger rival Nvidia's (NVDA.O) AI-powered blockbuster results.
Broadcom was expected to be one of the biggest beneficiaries of the artificial intelligence (AI) boom, behind trailblazer Nvidia, but the company's exposure to sluggish segments such as smartphones, telecoms gear and non-AI servers is impeding growth.
"Off the back of Nvidia's blowout earnings update, anything less than stellar is being seen as disappointing," said Danni Hewson, head of financial analysis at AJ Bell.
Apart from its generative AI gains, Broadcom's semiconductor business growth stalled in the third quarter and the same is expected for the fourth quarter, with a tough economy pressuring enterprise spending and as clients redirect their dollars to expensive AI gear from traditional computing hardware.
"Broadcom is more exposed to items like smartphones, where demand is slower and less linked to the mega-growth story of AI," said Hargreaves Lansdown analyst Sophie Lund-Yates.
Still, Broadcom's AI star looks to be on the rise.
The company, which supplies chips that help glue together AI supercomputers and traditional servers, expects networking revenue to jump 20% in the fourth quarter.
At least 14 brokerages raised their price targets on the stock, lauding the company's strong execution on its AI business.
Its stock has added more than $150 billion in market value so far this year.
Broadcom's forward price-to-earnings ratio for the next 12 months stood at about 20, compared with Nvidia's 35, according to Refinitiv data.