Broadcom’s AVGO Plummets 2.79%: Earnings Anticipation, AI Optimism, and Insider Sales Collide

Summary
• AVGO trades at $401.45, down 2.79% intraday, with a 52-week high of $414.61 and low of $138.10.
• Rosenblatt raises price target to $440, citing AI traction and infrastructure tailwinds.
• Insiders sold $376M of AVGO shares over the past year, sparking valuation concerns.

Broadcom’s sharp intraday decline reflects a collision of earnings anticipation, AI-driven optimism, and insider selling. With the stock trading near its 52-week low and a dynamic PE of 97.33, investors are weighing the company’s AI semiconductor momentum against valuation risks. The semiconductor sector, led by a struggling Nvidia (NVDA), remains in flux as global demand for AI infrastructure intensifies.

Earnings Anticipation and AI Optimism Clash with Valuation Concerns
Broadcom’s intraday selloff stems from a confluence of factors. The stock faces pressure ahead of its Q4 earnings report, with analysts expecting $1.87 in adjusted EPS and $17.46B in revenue. While Rosenblatt’s $440 price target highlights AI semiconductor growth and VMware software tailwinds, investors are wary of AVGO’s 42x forward PE—well above its 10-year average of 17. Insider selling of $376M over the past year, including a $121M dump by Chairman Henry Samueli, has further stoked skepticism. The stock’s decline also reflects broader sector jitters, as AI-driven valuations face scrutiny amid mixed guidance from peers like Oracle.

Semiconductor Sector Volatility as AI Optimism Meets Valuation Concerns
The semiconductor sector remains a battleground for AI optimism and valuation realism. Nvidia (NVDA), the sector’s bellwether, is down 2.95% intraday, reflecting broader market caution. Broadcom’s AI semiconductor segment, which grew 63% YoY in Q3, is seen as a key differentiator, but its premium valuation—42x forward earnings—compares unfavorably to peers like AMD and Intel. Meanwhile, China’s AI chipmakers are gaining traction, with Moore Threads and Zhonghao Xinying securing IPOs. Broadcom’s exposure to hyperscale AI demand contrasts with sector-wide concerns over overvaluation and slowing cloud spending.

Options and Technicals: Navigating AVGO’s Volatility
• MACD: 13.43 (bullish), Signal Line: 9.99 (bullish), Histogram: 3.44 (positive divergence)
• RSI: 72.23 (overbought), 200D MA: $278.19 (far below current price), Bollinger Bands: $322.50–$424.07 (wide range)

AVGO’s technicals suggest a short-term bearish bias despite a long-term bullish trend. The stock is trading above its 30D MA ($369.55) but far above its 200D MA, indicating potential overvaluation. RSI at 72.23 signals overbought conditions, while the MACD histogram’s positive divergence hints at lingering momentum. Key support levels include the 30D MA ($369.55) and the 200D MA ($278.19).

Top Options:
• AVGO20251219C387.5 (Call): Strike $387.50, Expiry 12/19, IV 54.78%, Delta 0.686, Theta -1.67, Gamma 0.0102, Turnover 41,884
- IV: High volatility (54.78%) suggests strong price swings; Delta: 68.6% sensitivity to price moves; Theta: -1.67 daily decay; Gamma: 1.02% sensitivity to delta changes.
- This call offers leverage (17.99% ratio) for a bearish scenario. If AVGO breaks below $387.50, the option could gain value as volatility spikes.

Payoff Estimation: A 5% downside to $381.38 would yield a payoff of $6.12 per contract. High liquidity (41,884 turnover) ensures ease of entry/exit.

Action: Aggressive bulls may consider AVGO20251219C387.5 into a bounce above $387.50, while cautious bears should watch for a breakdown below $369.55.

Backtest Broadcom Stock Performance
The backtest of Broadcom Inc. (AVGO) after an intraday plunge of at least -3% from 2022 to the present shows favorable short-to-medium-term performance. The 3-Day win rate is 56.90%, the 10-Day win rate is 62.28%, and the 30-Day win rate is 72.63%, indicating a higher probability of positive returns in the immediate aftermath of the plunge. The maximum return during the backtest was 14.40% over 30 days, suggesting that AVGO can experience significant gains in the months following a substantial intraday decline.

AVGO at a Crossroads: Earnings, AI, and Valuation in the Spotlight
Broadcom’s intraday decline underscores the tension between AI-driven optimism and valuation concerns. With earnings due post-market, investors must weigh the company’s AI semiconductor momentum against a stretched 42x forward PE. The stock’s technicals suggest a short-term bearish bias, but long-term bullish trends persist. Sector peers like Nvidia (down 2.95%) highlight the fragility of AI valuations. Watch for a breakdown below $369.55 or a post-earnings pop above $414.61 to validate AI optimism.