Broadcom (AVGO) Plunges 3.8% Amid AI Partnership Hype and Volatile Options Activity

Summary
• Broadcom (AVGO) shares nosedive 3.8% to $343.09, trading below its 52-week low of $138.1
• A $10 billion AI chip deal with OpenAI sparks sector-wide speculation and record institutional interest
• Options volume surges to 6.37 million shares, with 20 contracts trading above 50% leverage ratios
• The stock’s 14:18 ET price of $343.09 marks a 3.8% drop from its $356.70 previous close, with intraday swings between $339.65 and $350.67

Broadcom’s sharp selloff defies the AI hype cycle, as its landmark OpenAI partnership triggers a paradoxical market reaction. While the semiconductor sector rallies on AI infrastructure bets, AVGO’s price action reveals a tug-of-war between bullish fundamentals and bearish technicals. With options volatility spiking and key support levels in play, traders are recalibrating positions ahead of critical October expiration dates.

OpenAI Partnership Ignites Short-Term Volatility Amid Long-Term Optimism
Broadcom’s 3.8% intraday drop reflects a complex interplay of short-term profit-taking and long-term uncertainty. The $10 billion OpenAI deal, while securing 10 gigawatts of custom AI accelerators, has triggered a wave of options activity as traders hedge against near-term volatility. CEO Hock Tan’s comments about 'substantial demand' for XPUs have been offset by concerns over execution risks in co-designing chips with OpenAI. The stock’s 30-day RSI of 60.08 and MACD crossover below the signal line suggest a bearish near-term bias, despite the 100-day MA of $294.56 and 200-day MA of $250.22 indicating a long-term bullish trend.

Semiconductor Sector Rally Masks AVGO’s Divergence Amid AI Infrastructure Boom
While the semiconductor sector rallies on AI infrastructure bets—with NVDA down 3.7% and SK Hynix up 12%—Broadcom’s price action diverges. The $10 billion OpenAI deal contrasts with Intel’s $5 billion Nvidia partnership and AMD’s 10% OpenAI stake, creating a fragmented market response. AVGO’s 83.2x dynamic P/E ratio lags behind the sector average of 65x, reflecting skepticism about its ability to scale AI chip production to meet OpenAI’s 2026 deployment targets. This divergence highlights the sector’s bifurcation between established leaders and high-growth disruptors.

Options Playbook: Capitalizing on AVGO’s Volatility with High-Leverage Contracts
• 200-day MA: $250.22 (below current price)
• RSI: 60.08 (neutral)
• MACD: 4.44 (bearish crossover)
• Bollinger Bands: 322.37–357.19 (current price at 343.09, near lower band)

Key levels to watch include the 30-day support zone of $335.33–$336.76 and the 200-day support of $231.14–$235.60. The stock’s 3.8% drop has created high-conviction options opportunities, particularly for bearish plays given the MACD bearish crossover and RSI neutrality. Two top options stand out:

• AVGO20251017P330 (Put):
- Strike: $330, Expiry: 2025-10-17
- IV: 58.80% (high volatility)
- Delta: -0.2056 (moderate sensitivity)
- Theta: -0.1286 (moderate time decay)
- Gamma: 0.01335 (high sensitivity to price changes)
- Turnover: $441,141 (high liquidity)
- Leverage: 136.35% (high reward potential)
- Payoff (5% downside): $13.09 per contract
This put option offers asymmetric risk/reward, with high leverage and gamma amplifying gains if AVGO breaks below $330.

• AVGO20251017C345 (Call):
- Strike: $345, Expiry: 2025-10-17
- IV: 55.63% (moderate volatility)
- Delta: 0.5405 (moderate sensitivity)
- Theta: -2.4996 (high time decay)
- Gamma: 0.01968 (high sensitivity to price changes)
- Turnover: $1.34M (high liquidity)
- Leverage: 39.45% (moderate reward potential)
- Payoff (5% downside): $0.00 (out-of-the-money)
This call option is ideal for bullish traders expecting a rebound above $345, leveraging high gamma for rapid premium gains if the stock reverses.

Aggressive bears should prioritize AVGO20251017P330 for a 5% downside scenario, while cautious bulls may consider AVGO20251017C345 for a bounce above $345. Both contracts offer high liquidity and leverage, aligning with the stock’s volatile technical profile.

Backtest Broadcom Stock Performance
Here is the completed back-test for your requested strategy – “buy AVGO after any −4 % (or worse) close-to-close drop and exit after 5 trading days”.Key points to note 1. Event definition: daily close return ≤ −4 %. 2. Sampling window: 2022-01-01 → 2025-10-13. 3. Execution logic: open on the next trading day’s close; liquidate after 5 trading days (no other risk controls). 4. Tool-chain adjustment: the dedicated event_backtest_engine threw an internal error, so I routed the task through the strategy_backtest_engine, which can handle the same signal set without issue. 5. All auto-filled parameters (exit after 5 days, “close” price type, default stop-loss / take-profit omitted) were chosen to keep the test aligned with a pure “mean-reversion” hypothesis and to avoid introducing extra assumptions.Please view the interactive report below.Simply click the module to see full performance metrics (CAGR, hit-rate, drawdown curves, trade list, etc.). Let me know if you’d like further tweaks – for example, adding stop-loss / take-profit bands, changing the exit horizon, or comparing to alternative triggers such as −3 % or −5 % moves.

AVGO at Crossroads: AI Hype vs. Technical Headwinds—Act Now
Broadcom’s 3.8% drop underscores the tension between AI partnership optimism and technical bearishness. While the OpenAI deal positions AVGO as a key player in the AI infrastructure race, the stock’s bearish MACD and RSI neutrality suggest short-term weakness. Traders should prioritize the AVGO20251017P330 put for a 5% downside play, given its 136.35% leverage and high gamma. Meanwhile, the sector leader NVDA (-3.74%) offers a contrasting trade, but AVGO’s options volatility and leverage ratios present more immediate opportunities. Watch for a breakdown below $330 or a rebound above $345 to dictate next steps.