Broadcom's 3.27% Plunge: A Volatile Move Amid AI Sector Turbulence

Summary
• Shares of Broadcom (AVGO) fell 3.3% in the morning session after a broader pullback sparked by reports that China banned its major tech firms from buying U.S. AI chips.
• The stock traded as low as $341.50, a 3.27% drop from its previous close of $360.00, with a 52-week high of $374.23 now in jeopardy.
• Sector peers like Nvidia (NVDA) also declined, with the semiconductor sector under pressure from regulatory and geopolitical headwinds.

Broadcom’s sharp intraday decline reflects a broader selloff in the tech sector, driven by fears of reduced demand for U.S. AI chips in China. The stock’s 3.3% drop, while steep, remains within its historical volatility range, suggesting the market views the news as significant but not existential. Investors are now weighing whether this correction presents a buying opportunity in a stock that has surged 49% year-to-date.

China's AI Chip Ban Sparks Sector-Wide Selloff
The immediate catalyst for Broadcom’s decline was the reported Chinese ban on major tech firms purchasing U.S. AI chips, a move that triggered a broad selloff in the Nasdaq and tech sector. This regulatory shift, while not directly targeting Broadcom, created a risk-off environment for semiconductor stocks, which are heavily reliant on AI-driven demand. The news first impacted Nvidia, the sector leader, before rippling through peers like Broadcom. While the stock’s 3.3% drop is steep, its 52-week high of $374.23 and 52-week low of $138.1 indicate it remains within a long-term bullish trend. The market’s reaction underscores the sector’s sensitivity to geopolitical shifts, particularly in AI, where U.S.-China tensions are intensifying.

Semiconductor Sector in Turmoil as AI Uncertainty Lingers
The semiconductor sector, led by Nvidia (NVDA), mirrored Broadcom’s decline, with NVDA down 2.47% intraday. This synchronized selloff highlights the sector’s shared exposure to AI demand and regulatory risks. While Broadcom’s drop is steeper, its 52-week high of $374.23 remains intact, suggesting the sell-off is more about profit-taking than a fundamental shift. The sector’s broader weakness reflects investor caution over China’s AI ambitions and the potential for reduced U.S. chip exports. However, Broadcom’s 49% YTD gain and robust 52-week range indicate underlying strength, contrasting with more cyclical peers.

Options Playbook: Capitalizing on Volatility with Strategic Put Options
• 200-day average: 236.37 (well above current price)
• RSI: 73.75 (overbought territory)
• MACD: 18.10 (bullish divergence)
• Bollinger Bands: Current price at $348.20, below the upper band of $379.26

Broadcom’s technicals suggest a short-term overbought condition, with RSI at 73.75 and MACD divergence indicating potential for a pullback. The 200-day average of $236.37 provides a critical support level, while the Bollinger Bands suggest the stock is trading near the lower end of its volatility range. Traders should monitor the $327.50 level, a key psychological and technical support point, for potential short-term reversals.

Top Options Picks:
• AVGO20250926P337.5 (Put Option):
- Strike Price: $337.50
- Expiration: 2025-09-26
- IV: 39.24% (moderate)
- Leverage Ratio: 80.11% (high)
- Delta: -0.2945 (moderate bearish exposure)
- Theta: -0.0229 (low time decay)
- Gamma: 0.0152 (high sensitivity to price moves)
- Turnover: 738,509 (liquid)
- Payoff at 5% Downside: $11.20 (max profit if price drops to $330.80)
- Why it stands out: High leverage and gamma make this put ideal for a moderate bearish move, with sufficient liquidity for entry/exit.

• AVGO20250926P335 (Put Option):
- Strike Price: $335.00
- Expiration: 2025-09-26
- IV: 39.47% (moderate)
- Leverage Ratio: 95.48% (high)
- Delta: -0.2574 (moderate bearish exposure)
- Theta: -0.0469 (moderate time decay)
- Gamma: 0.0142 (high sensitivity to price moves)
- Turnover: 451,247 (liquid)
- Payoff at 5% Downside: $13.20 (max profit if price drops to $330.80)
- Why it stands out: Higher leverage and moderate delta offer amplified returns for a similar price move, with strong gamma to benefit from volatility.

Trading Setup: Aggressive bears should target the $327.50 level with the AVGO20250926P337.5 put, while those seeking higher leverage may opt for the AVGO20250926P335 put. Both contracts offer strong gamma and liquidity, making them ideal for a short-term bearish play. If $327.50 breaks, consider adding the AVGO20250926P330 put for deeper downside exposure.

Backtest Broadcom Stock Performance
Below is the event-based back-test you requested. Key assumptions auto-filled for you:1. “–3 % intraday plunge” is interpreted as a trading day when the close-to-previous-close return ≤ –3 % (this simplifies data needs while still capturing large one-day drops).2. Test window: 2022-01-01 to 2025-09-17 (today).3. Price series: split-adjusted daily close.Results are rendered in the interactive module – please scroll or open it to view detailed win-rate, average return curves and significance tables.Interpretation highlights:• 68 qualifying plunge events were found during the period. • Average 1-day follow-through is essentially flat (-0.03 %), improving to roughly +6 % after 30 trading days, slightly lagging the benchmark. • Win-rates drift from ~49 % on day 1 to ~55 %-70 % through the first two weeks, but none of the horizons reach conventional statistical significance. Let me know if you’d like to adjust the plunge definition, add risk-adjusted metrics, or run a trading strategy on these dates!

Navigating the AI Uncertainty: A Call to Action for Investors
Broadcom’s 3.3% intraday drop reflects a broader sector selloff driven by China’s AI chip ban and regulatory uncertainty. While the stock remains within its long-term bullish trend, the overbought RSI and MACD divergence suggest a short-term correction is likely. Investors should monitor the $327.50 support level, with the AVGO20250926P337.5 and AVGO20250926P335 puts offering strategic bearish exposure. The sector leader, Nvidia (NVDA), down 2.47%, underscores the shared vulnerability of AI-dependent semiconductors. Act now: Position for a potential breakdown below $327.50 or a rebound above $345.00 to re-enter long-term bullish bets.