Broadcom Plunges 2.51% Intraday, Can AI-Driven Momentum Overcome Short-Term Turbulence?

Summary
• Broadcom (AVGO) slumps to $276.43, its steepest drop since March 2025
• Tomahawk Ultra Ethernet switch launch sparks mixed market reactions
• Sector peers like NVDA also under pressure amid US-China tech tensions
• 52-week high of $290.54 now 4.5% out of reach as bears test support levels

Broadcom’s intraday selloff has drawn sharp attention amid its recent AI-driven growth narrative. With the stock trading at $280.97—down 2.51% from its July 2 close of $288.21—the decline has created a $11.24 gap between current price and 52-week high. The move coincides with the Tomahawk Ultra Ethernet switch launch, a $51.2T AI infrastructure play, and broader semiconductor sector jitters over export curbs and climate risks. Investors now face a critical juncture: is this a buying opportunity in a fundamentally strong AI stock, or a warning sign of sector-wide headwinds?

Tomahawk Ultra Launch and Sector Volatility Drive AVGO’s Sharp Decline
Broadcom’s intraday slump stems from a confluence of factors: 1) sector-wide anxiety over US-China tech tensions, with Nvidia (NVDA) down 1.99% and TSMC raising sales forecasts amid AI optimism; 2) mixed market reception to the Tomahawk Ultra’s launch despite its 51.2Tbps throughput and 10-byte header innovation; and 3) profit-taking after a 463% cumulative return over 2.5 years. While the product’s pin-compatibility with predecessors and In-Network Collectives feature drew analyst praise, broader concerns about AI infrastructure oversupply—cited in Chinese state media warnings—have spooked investors. This creates a short-term dislocation between AVGO’s long-term AI growth narrative and immediate sector-specific risks.

Semiconductor Sector Volatility Intensifies as AI Leaders Face Crosswinds
The Semiconductor Products sector is experiencing heightened volatility as AI leaders navigate conflicting signals. While TSMC raised 2025 sales forecasts and Nvidia secured relaxed export curbs to China, sector-wide headwinds persist. Chinese state media warned of a potential AI computing glut, ASML shares tumbled 7.1%, and Hesai lost a lawsuit against the US government. Within this context, Broadcom’s 2.51% drop aligns with sector trends but lags behind NVDA’s -1.99% decline, suggesting investors see more near-term resilience in Broadcom’s diversified AI and infrastructure software (VMware) business. However, the sector’s 27.61 average Forward P/E versus AVGO’s 42.7 indicates valuation concerns remain.

AVGO 2X Leverage ETFs and Strategic Options for Short-Term Volatility
• MACD: 9.697 (above signal line 9.663), RSI: 61.49 (neutral), Bollinger Bands: 257.22–290.40, 200D MA: $209.39 (far below)
• 30D Support: $275.03–275.91, 200D Resistance: $177.51–180.35

Broadcom’s technicals suggest a short-term bearish setup with long-term bullish fundamentals intact. The stock is trading near its lower Bollinger Band ($257.22) but remains above key 30D support at $275.03. Aggressive traders may consider Direxion Daily AVGO Bull 2X Shares (AVL) (-4.89%) or Defiance Daily Target 2X Long AVGO ETF (AVGX) (-4.84%) for leveraged exposure, though both ETFs have underperformed the stock’s fundamentals. For options, two contracts stand out:

• AVGO20250725C280 (Call, $280 strike, 7/25 expiration): IV 36.81%, Leverage 54.15%, Delta 0.5688, Theta -1.9122, Gamma 0.0362, Turnover $1.59M
– High leverage and moderate delta position this call to profit from a rebound above $280, with theta decay manageable for a 3-day expiration
• AVGO20250725C282.5 (Call, $282.5 strike, 7/25 expiration): IV 36.12%, Leverage 73.13%, Delta 0.4764, Theta -1.6907, Gamma 0.0374, Turnover $1.84M
– Strong leverage and gamma make this ideal for a sharp bounce, though delta suggests it’s less sensitive to immediate price swings

Payoff Analysis (5% downside to $266.92):
– AVGO20250725C280: $0 (strike > ST) → 0%
– AVGO20250725C282.5: $0 (strike > ST) → 0%
If $280 breaks, consider AVGO20250725C282.5 for a short-term rebound trade into the $285–290 range.

Backtest Broadcom Stock Performance
The backtest of Broadcom Inc. (AVGO) after an intraday plunge of at least -3% shows favorable short-to-medium-term performance. The 3-Day win rate is 57.86%, the 10-Day win rate is 62.87%, and the 30-Day win rate is 73.06%, indicating a higher probability of positive returns in the immediate aftermath of such events. The maximum return during the backtest period was 12.52% over 30 days, suggesting that AVGO often rebounds strongly from significant dips.

Bullish Long-Term Fundamentals Amid Short-Term Volatility
Broadcom’s long-term AI growth trajectory remains intact with $5.1B in projected Q3 AI revenue and 60% YoY growth expected through 2026. However, short-term sector headwinds—including US-China trade tensions and AI infrastructure oversupply concerns—have created a dislocation. Investors should monitor the $275.03 support level and 7/25 options expiration for directional clues. For context, sector leader Nvidia (NVDA) is down 1.99%, indicating broader sector fragility. Aggressive bulls may consider AVGO20250725C282.5 into a bounce above $285, while conservative investors should watch for a breakdown below $275 to trigger defensive positioning. With 32 of 36 analysts still recommending 'Strong Buy', AVGO’s fundamentals suggest this is a volatility event, not a value event.