What Happened?
Shares of fabless chip and software maker Broadcom (NASDAQ: AVGO) fell 3.1% in the morning session after a broader market rotation out of the technology sector led to profit-taking following a recent rally.
The move was part of a wider trend that saw high-growth technology stocks fall, with the Nasdaq experiencing the sharpest decline among the major indices. Multiple reports indicated that traders were locking in profits, particularly from the artificial-intelligence trade, which had previously seen a strong run-up. This market action represented a shift in investor focus, as money moved out of tech.
Defense stocks emerged as the primary beneficiary of this capital shift, surging after President Trump proposed a massive $1.5 trillion defense budget for 2027. Major contractors rallied on the news, with Northrop Grumman jumping over 10% and Lockheed Martin gaining nearly 8%, providing a counterbalance to the tech slump that kept the S&P 500 flat. The rotation into heavy industry was further supported by a stabilization in energy markets, as crude prices rebounded.
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What Is The Market Telling Us
Broadcom’s shares are very volatile and have had 23 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 20 days ago when the stock gained 1.7% on the news that the company received positive commentary from Wall Street analysts, who viewed the stock's recent sharp decline as a buying opportunity.
Specifically, Truist Securities raised its price target on the stock to $510 from $500, while keeping a 'Buy' rating. This followed a nearly 20% drop in the share price after the company's recent earnings report, where some investors were reportedly concerned about the lack of a full-year artificial intelligence revenue outlook. Echoing the positive sentiment, a UBS analyst noted the sell-off was likely an overreaction and also increased their price target to $475. The stock also benefited from a broader rally among chipmakers.
Broadcom is down 4.4% since the beginning of the year, and at $332.40 per share, it is trading 19.5% below its 52-week high of $412.97 from December 2025. Investors who bought $1,000 worth of Broadcom’s shares 5 years ago would now be looking at an investment worth $7,459.
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