Key insights
- European chip stocks are experiencing significant losses, extending a decline following Broadcom's disappointing AI revenue outlook. Despite Broadcom narrowly beating revenue and EPS expectations, its decision to maintain its 2027 AI revenue target and lower-than-expected current quarter AI guidance has spooked investors. This has led to a broad sell-off in semiconductor equities across Europe, impacting major players like ASML and Infineon, and suggesting potential headwinds for the AI chip sector in the near term.
Investing.com -- European semiconductor stocks fell sharply for a second consecutive session on Friday, as the fallout from Broadcom’s quarterly results and outlook continued to weigh on the sector.
Shares of ASML, ASM International, and BE Semiconductor dropped between 3% and 4%, while STMicroelectronics, Infineon, Soitec, Siltronic, and ams OSRAM slumped between 3% and 8%.
The declines follow a broad retreat in European tech on Thursday, itself triggered by Broadcom’s print released Wednesday after the market close.
While the U.S. chipmaker posted revenue of $22.2 billion and earnings per share of $2.44, narrowly ahead of Wall Street expectations, investors focused on Broadcom’s decision to keep its fiscal 2027 AI revenue target at $100 billion rather than raising it, as many had anticipated given strong momentum in its custom chip business.
Its AI chip revenue guidance for the current quarter of $16 billion also fell short of the $17.2 billion analysts had penciled in, even as overall revenue guidance of $29.4 billion came in above consensus.
Broadcom shares fell 12.6% on Wednesday in response, pulling European peers including Nokia, STMicroelectronics, Infineon, ASML, and ASM lower alongside it.
Bernstein analyst Stacy Rasgon, who raised his price target on Broadcom to $550 from $525, acknowledged the disappointment but urged a longer view. "We suspect the shares may take a pause for the next couple of quarters. But the story gets interesting again once we enter 2027," he said.
"At the end of the day we have a company growing revenues and EPS >50%, with gross/operating margins in the 70s/60s, and potentially trading at a teens P/FE in an environment that is only getting stronger," he added.
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