Broadcom's AVGO Plummets 8.76%: What's Behind the Sudden Selloff?

Summary
• Broadcom (AVGO) plunges 8.76% to $370.77, erasing $36B in market cap
• Q4 revenue hits $18B, AI semiconductor sales double YoY to $8.2B
• CEO Hock Tan cites $73B AI backlog but warns of margin pressures
• Sector peers like Nvidia (NVDA) trade mixed as AI hype meets reality

Broadcom’s sharp intraday drop reflects investor unease over guidance ambiguity and margin concerns, despite record quarterly results. The stock’s 8.76% decline—its largest in eight months—underscores the volatile AI semiconductor landscape as markets weigh near-term execution risks against long-term growth potential.

AI Backlog and Margin Concerns Trigger Sell-Off
Broadcom’s selloff stems from CEO Hock Tan’s conference call remarks, where he disclosed a $73B AI product backlog but refrained from providing a 2026 revenue forecast. While the $18B Q4 revenue beat estimates, Tan’s admission of narrowing AI margins and lack of clarity on future demand spooked investors. The $11B Anthropic order, though significant, was offset by concerns over execution timelines and profit sustainability. Additionally, the absence of a concrete AI roadmap for 2026 left analysts scrambling for clarity, triggering profit-taking in a stock that had surged 75% in 2025.

Semiconductor Sector Mixed as AI Hype Meets Reality
The semiconductor sector remains polarized as AI-driven optimism clashes with execution risks. While Broadcom’s shares fell 8.76%, Nvidia (NVDA) traded down 0.25% despite dominating AI chip sales. Leveraged ETFs like Direxion Daily AVGO Bull 2X Shares (AVL) plummeted 18.1%, reflecting short-term volatility. The sector’s mixed performance highlights diverging investor sentiment: AI infrastructure demand remains robust, but near-term margin pressures and guidance ambiguity are creating friction.

Options and ETFs for Navigating AVGO’s Volatility
• 200-day average: 279.15 (far below current price)
• RSI: 72.78 (overbought territory)
• MACD: 13.77 (bullish divergence)
• Bollinger Bands: 323.75–427.93 (current price near lower band)

Broadcom’s technicals suggest a short-term bounce from oversold levels, but structural risks persist. Key support at $339.98 (30D) and $323.75 (Bollinger lower) could trigger further declines if breached. The Roundhill AVGO WeeklyPay ETF (AVGW) -10.6% and Direxion Daily AVGO Bull 2X Shares (AVL) -18.1% reflect leveraged exposure to near-term volatility.

Top Options Contracts:
• AVGO20251219P350 (Put, $350 strike, 12/19 expiry):
- IV: 49.01% (moderate)
- Delta: -0.2445 (moderate sensitivity)
- Theta: -0.1022 (modest time decay)
- Gamma: 0.0118 (responsive to price swings)
- Turnover: $992,234 (liquid)
- LVR: 91.69% (high leverage)
- Payoff at 5% downside: $19.27 (max profit if price drops to $352.71)
- Ideal for capitalizing on a $350 support breakdown with high leverage and liquidity.

• AVGO20251219P355 (Put, $355 strike, 12/19 expiry):
- IV: 48.09% (moderate)
- Delta: -0.3070 (higher sensitivity)
- Theta: -0.0442 (minimal time decay)
- Gamma: 0.0135 (strong gamma)
- Turnover: $637,428 (liquid)
- LVR: 68.81% (balanced leverage)
- Payoff at 5% downside: $24.27 (max profit if price drops to $355.71)
- Offers higher delta for directional bets while retaining liquidity and moderate IV.

Action: Aggressive bears may consider AVGO20251219P350 for a $350 pivot, while balanced short-termers could target AVGO20251219P355 for a $355 pivot. Both contracts offer favorable risk/reward profiles under a 5% downside scenario.

Backtest Broadcom Stock Performance
The backtest of Broadcom Inc. (AVGO) after an intraday plunge of -9% from 2022 to the present shows favorable short-to-medium-term performance. The 3-Day win rate is 57.02%, the 10-Day win rate is 61.84%, and the 30-Day win rate is 72.37%, indicating a higher probability of positive returns in the immediate aftermath of the plunge. The maximum return during the backtest was 14.45% over 30 days, suggesting that AVGO has the potential for recovery and even exceed pre-plunge levels.

Act Now: AVGO's Volatility Presents Strategic Opportunities
Broadcom’s sharp correction reflects near-term uncertainty around AI margin sustainability and guidance clarity, but its long-term fundamentals remain intact. Investors should monitor the $339.98 (30D) and $323.75 (Bollinger lower) support levels—breaks could trigger renewed selling. The top options contracts (AVGO20251219P350 and AVGO20251219P355) offer leveraged exposure to potential downside, while the sector’s mixed performance (Nvidia -0.25%) suggests broader AI sector caution. Watch for $323.75 breakdown or a $350 pivot to re-enter longs.