Hock Tan, CEO of Broadcom
Lucas Jackson | Reuters
Broadcom led a plunge in chip stocks Friday after the chipmaker missed revenue expectations and lowered guidance for 2019 citing a ‘broad-based’ slowdown in demand and the U.S. crackdown on Huawei.
Broadcom shares lost more than 9% in premarket trading Friday. Skyworks, Xilinx, Micron, Advanced Micro Devices, Nvidia and Qualcomm all followed sutit with losses greater than 3%. Intel was down more than 2%.
Broadcom’s revenue for the fiscal second quarter came in Thursday evening at $5.52 billion vs. the $5.68 billion expected by analysts polled by Refinitiv. The chipmaker also said it now expects $22.60 billion in revenue for fiscal 2019, well bellow the $24.31 billion seen by analysts polled by Refnitiv.
“We currently see a broad-based slowdown in the demand environment, which we believe is driven by continued geopolitical uncertainties, as well as the effects of export restrictions on one of our largest customers. As a result, our customers are actively reducing their inventory levels, and we are taking a conservative stance for the rest of the year,” Broadcom CEO Hock Tan said in a statement.
“The environment is very, very nervous,” Tan later added on the call.
“Truly depressing Broadcom call with a solemn Hock Tan,” said CNBC’s Jim Cramer Thursday night.
Chip stocks rebounded in June in what some thought was a good sign for the market and global economy. The VanEck Vectors Semiconductor ETF was up 20% this year before Broadcom’s warning. However, while the broader market (S&P 500) has rallied to within 2% of its record, the chip stock ETF is 12% from its record reached in April, an underperformance that may have been signaling the problems coming out now with Broadcom.
The sector is sometimes seen as a leading indicator for the stock market and global economy. The broader market fell on Broadcom’s warning. Nasdaq futures were down 0.8%, while S&P 500 futures were off by 0.3%.
This is a developing story. Check back for updates.
— With reporting by Jordan Novet.