Broadcom falls amid AI chip surge as revenue stalls

Published On Sep 6, 2024, 5:03 AM

Broadcom reported a forecast for its fourth-quarter revenue that was below Wall Street expectations, projecting around $14 billion while analysts anticipated $14.04 billion. Although the company saw a surge in orders for its artificial intelligence chips, its shares dropped by over 10% in pre-market trading due to overall declining demand in its broadband and non-AI networking segments. Broadcom also experienced a significant loss attributed to a $4.5 billion tax provision but increased its AI revenue forecast for the year to $12 billion, benefiting from a stronger demand in custom chips and networking equipment. Overall, while Broadcom's AI segment showed growth, the weak performance in other divisions impacted its overall outlook negatively.

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Despite an increase in AI revenue, Broadcom's overall weak quarterly forecast, especially with falling demand in broadband and networking sections, raises concerns about future performance. The significant drop in share price reflects investor disappointment, particularly in light of broader expectations set by AI market leaders like Nvidia. Additionally, the large loss recorded indicates potential financial distress which investors should consider in their strategies.

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