Broadcom slides 5% to $397 as AI chip trade cools

Broadcom shares fell 5 percent to $397.04 on Aug. 14, cutting the chipmaker's market value to $1.89 trillion as AI semiconductor stocks extended a month-long pullback.

The retreat comes even as Goldman Sachs projects AI demand will exceed compute center capacity for years, a forecast that has underpinned the sector's rally and left valuations stretched.

The iShares Semiconductor ETF, up 81 percent year to date to $552, has slipped 5 percent over the past month as investors digest extended multiples. Intel, the sector's biggest gainer this year, climbed 176 percent to $102 after a $20 billion equity raise priced at $95 a share. Advanced Micro Devices, up 127 percent to $487, trades at 123.46 times trailing earnings, the richest multiple in the group. NVIDIA, up 20 percent to $224, carries a $5.43 trillion market value at 34.34 times earnings.

Broadcom's drop, at 69.96 times trailing earnings before the slide, shows how the AI capex cycle has repriced the entire chip complex. With the SOXX ETF at 44.22 times earnings, any cooling in AI spending could pressure the group further, with the next test coming as chipmakers report quarterly results.

The move in Broadcom, one of the largest weights in the Nasdaq and S&P 500, could ripple across the tech sector and related exchange-traded funds. Traders pointed to valuation-driven profit-taking after the group's outsized gains, with the SOXX ETF's 5 percent monthly decline pointing to a cooling sector.

Intel's $20 billion equity raise, upsized from an initial $15 billion goal after being oversubscribed five times, has drawn attention to the sector's capital intensity. The offering, priced at $95 a share for $19.7 billion in net proceeds, includes a 30-day underwriter option for up to $3 billion more. Proceeds will support AI-compute opportunities including physical AI, purpose-built silicon, and advanced packaging.

McKinsey estimates the race to build AI infrastructure could require as much as $7.1 trillion in investment by 2030, a scale that has driven chip valuations higher. Goldman Sachs' projection that AI demand will outpace compute center capacity for years has kept institutional buyers engaged even as multiples stretch.

The valuation gap within the group is stark. NVIDIA, despite a $5.43 trillion market value, trades at 34.34 times earnings, the most reasonable multiple of the four. Broadcom at 69.96 times and AMD at 123.46 times carry far heavier expectations, leaving them more exposed to any slowdown in AI spending. Intel, with no trailing earnings to anchor its valuation, has become the group's most speculative bet after its 176 percent run.

For investors, the question is whether the semiconductor group can absorb another leg of AI capex without stretching multiples further. The SOXX ETF at 44.22 times earnings sets the bar, and every name above that mark carries a heavier burden of proof. Broadcom's retreat, alongside the sector's broader pullback, suggests the market is beginning to price in a more measured pace of AI spending growth. The next test comes as chipmakers report quarterly results, with any guidance miss likely to hit the most richly valued names hardest.

This article is for informational purposes only and does not constitute investment advice.