Broadcom’s Guidance Miss Exposes the Fragility of the AI Trade

Broadcom's guidance miss on Q3 AI chip sales ($16B vs. $17.2B expected) triggered a sharp market rotation away from expensive AI semiconductors into defensive and value stocks. Despite beating on current quarter earnings, the company's soft forward guidance spooked investors already concerned about stretched valuations (P/E at 42.53, near dot-com peak levels). The sell-off dragged down the entire chip sector while the Dow surged on defensive names, exposing how little margin for error remains in the AI trade amid rising Treasury yields and hawkish Fed expectations.