Broadcom Stock Whiplash After Earnings Release

In this episode of Motley Fool Hidden Gems Investing, Motley Fool contributors Tyler Crowe, Matt Frankel, and Lou Whiteman discuss:

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A full transcript is below.

This podcast was recorded on June 4, 2026.

Tyler Crowe: We've got Broadcom stock whiplash today on Motley Fool Hidden Gems Investing. Welcome to Motley Fool Hidden Gems Investing. I'm your host, Tyler Crowe, and today I'm joined by longtime Fool contributors Lou Whiteman and Matt Frankel. Today, we were going to mix it up a little bit. We thought we're going to do a bunch of different segments and do some basically non-earnings takes because it's June. We don't normally get a lot of surprise earnings stuff, but then Broadcom had to go and give its earnings, and now its stock’s down, I think, almost 15% as we are taping today, as we're going to get into. I'll let you guys really digest the numbers here. But by all objective metrics, all the numbers looked good. The guidance looked fine. Is this really just expectations game, Lou?

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Lou Whiteman: I think it is. Expectations are everything. It's glass half full of glass empty. Stock is up 15%, just heading into earnings. When you get that sort of expectations, any slight hiccup, any slight sneeze can set you back. This was a slight miss on revenue, but look, it's brutal when people are expecting enough. Apparently, it was enough to outweigh 140% gains in AI semiconductor sales, which I don't know, Tyler, sounds pretty OK to me.

Tyler Crowe: Matt, you were the task a little bit more with the nitty-gritty of the numbers here. What did you see in this that was like, maybe not great. I don't know. It's hard to look at these and say, Yeah, we should definitely be dropping the stock by 15% because that's just what we do these days.

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Matt Frankel: It's not only Broadcom. CrowdStrike also reported. We're getting all the reports from companies that use weird fiscal years, and some of them haven't been too impressive. But there was a lot to like here, 48% revenue growth, they beat on the bottom line. As Lou said, 140% roughly growth in AI semiconductor revenue. Guidance was strong, but if you look into the guidance, the AI revenue that they're guiding for is not quite what the market expected, so that could be driving a little bit of the sell-off. Any slowdown in AI or perceived slowdown is enough to scare investors, and it's not just that it was running up 15% heading into earnings, Broadcom was up 90% over the past year. In a nutshell, this stock went into the report priced for a blowout quarter and blowout guidance. It was a good quarter. I wouldn't call this a blowout quarter, especially on the AI side of the business, not a blowout.

Tyler Crowe: We certainly did see a lot of blowouts this most recent quarter looking at a lot of these suppliers. Taiwan Semi, basically everyone was like, everything is awesome. With Broadcom's numbers looking pretty good. It was almost like comparing to everyone else. Is like, Well, they were that good. Can you do as well? This touches on a couple of top themes and topics we've discussed so far during this week. When the three of us were on the show on Tuesday, we were talking about how much does narrative play into your thesis? Narrative is also valuation-based. We were talking about this with Dollar General because, as a value play as a stock, you are betting on a return to median, return to average valuation.

Right now, we're all the narrative is defying expectations to justify very high valuations. At the same time, too, it touches on this idea of the start-stop whack-a-mole discussion about the AI build-out that, Lou, you, I, and Travis were talking about yesterday, where it seems like every couple of months here, we're talking about the next bottleneck. At first, it was is going to be chits. Then it became memory chips. Now we're talking about, the old companies like Dell that are just building off products, and we can name like 15 other suppliers where somewhere there's a stop-start going on here where somebody's doing awesome, but then, just because they didn't blow out earnings, they're going to have a 15% stock drop.

Lou Whiteman: Two points here, one macro, one micro, I guess. First of all, the macro, the narrative. I think you are so right and I think investors better be watching the narrative right now because there is a real indication that nothing is good enough. I look at what happened with Nvidia’s quarter. Look what the stock did there. Expectations are so out of this world right now that I don't know if any company, almost, can satisfy the market long term. For strong companies that can outlast the cycle, that's just an annoyance. But if you are in some of the, I guess, more speculative AI companies, I think this should be a warning sign to you that nothing is good enough, so look out below.

Specific to Broadcom, look, there are massive expectations still up ahead. CEO Hock Tan is forecasting $100 billion in annual AI chip revenue in fiscal ‘27. They're on pace to do about half of that this year, Tyler, and it took triple-digit gains to get to that 50 billion that they hope to do this year. I see that the stop-start nature of this, the questions about potential fragility, and it scares me. You add in the fact that OpenAI and Anthropic are going to account for a lot of that growth. Those are two very different companies right now. Even if OpenAI gets their act together and does well, you are putting a lot of eggs in just a couple of baskets with that customer concentration. I'm not predicting gloom. Broadcom is a good company, but right now, it's just hard to look at this and say, yes, everything's fine, everything goes up from here.

One other thing, software revenue, which is supposed to be recurring, to balance this out. That only grew by 9%. All of this growth is going to have to come based on their ability to keep selling hardware at really amazing levels. We'll see how long that lasts.

Matt Frankel: To Lou’s point, the expectations are huge here. You mentioned they're predicting about $100 billion of AI revenue in 2027. For about $40 billion of that, a little more is expected to come from Anthropic alone. OpenAI is a big client. The anthropic and OpenAI IPOs are really worth paying attention to. Anthropic just raised $65 billion. We've talked about this with other companies. I think Oracle was one of them where these commitments they're going to need to pay. They raised $65 billion. OpenAI raised $120 billion recently. That's not going to be enough for all of their commitments. These IPOs really need to go well, they need to get strong valuations. OpenAI and anthropic IPOs are probably the single most important near-term story for Broadcom investors to watch. The 2027 and 2028 growth story for the company, which the IPOs are going to directly support. It's largely intact for now, but that could change if demand cools off.

Tyler Crowe: We'll be getting into that in a later segment, but the amount of money that needs to be raised this year to make those commitments to Broadcom and all their other suppliers is looking pretty hefty and could have some pretty profound impacts on the market in general, beyond just those individual companies. But we're going to hit that after the break. But before that, we're going to actually take a pause from the AI discussion and just kind of look at some other sectors and some stocks that are really changing up the narrative of the sector that they're in. We'll hit that after the break.

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Tyler Crowe: I was reading an investing newsletter a couple of days ago, and there was a quote from the chief economist at Apollo talking about diversification and the importance of it. This was an interesting quote to me. It was factor investing tells investors not to be overexposed to just one factor. What he said was, the new 60/40 is now the AI versus non-AI thing. For those who aren't familiar, 60/40 was the benchmark gold standard for individual investors, people, probably not picking individual stocks. 60% of your money in stocks, 40% of your money in bonds, maybe you start changing that as you get older, but it was the standard benchmark that most wealth advisors told you to do to get diversification in the market.

As this quote is saying, it's not just the factor of bonds versus stocks, but it's also how much diversification do you have away from AI? In the spirit of that, we wanted to dedicate a whole segment to basically sectors and parts of the market that just aren't AI. Specifically, we've had a pretty bifurcated market so far. We've had some industries doing extremely well and others have been taking a bit on the chin. I think insurance, healthcare, biotech has done surprisingly not well. Well, energy, semiconductors, technologies absolutely fly. In that vein, what we played a little game with these guys. I each wanted you guys to pick one stock from an industry and find a stock that you find that is bucking the sector trend. Is there a company that's doing lousy in these awesome sectors or a company that's doing gangbusters in a downtrodden sector? I want to start with you, Matt. What's the sector in the stock that you're like, This is interesting.

Matt Frankel: Well, it's been a long time since I've gotten to talk about real estate because all we talk about is AI and SpaceX lately. I'm going to bring