Broadcom Can’t Stop Falling. Overreaction or AI Stock Warning Sign?

Core Viewpoint - Broadcom has experienced significant stock performance in 2025, primarily driven by demand for AI-related semiconductors, but faced a sharp decline following its fiscal fourth-quarter earnings report due to concerns over gross margin pressure [2][3][4]. Group 1: Stock Performance - Broadcom shares increased approximately 46% year-to-date, reaching an all-time high of $414.61 per share [2]. - Following the peak, shares fell more than 11% in a single session and over 17% across three trading days despite beating Q4 earnings expectations [3][4]. - The stock is trending lower in premarket trading, reflecting broader concerns about AI investment returns [4]. Group 2: Financial Performance - In Q4, Broadcom's AI revenue reached $6.5 billion, marking a 74% year-over-year increase, driven by strong demand from major clients like Google and Meta Platforms [5][6]. - Overall revenue growth for the quarter was 28%, supported by major custom chip contracts and the infrastructure software segment bolstered by the VMware acquisition [6]. Group 3: Analyst Outlook - Analysts maintain Strong Buy ratings for Broadcom, with an average price target of $455, indicating a potential upside of 33% [3]. - The company trades at a 0.69 PEG ratio with an expected long-term EPS growth of 36% [3].