Broadcom's AVGO Plummets 5.17%: What's Behind the Sudden Selloff?

Summary
• AVGO drops 5.17% to $323.65, its lowest since 2023
• Intraday range spans $346.44 to $321.63
• Sector peers like Intel (INTC) fall 1.86% amid AI memory shortages
• Options chain sees explosive put volume at 310–315 strike prices

Broadcom’s AVGO is in freefall, trading 5.17% below its previous close amid a broader semiconductor sector selloff. The stock’s sharp decline—its worst intraday drop since 2023—coincides with intensifying supply chain tensions and a surge in put options activity. With the stock trading near its 52-week low of $138.10, investors are scrambling to decipher whether this is a buying opportunity or a warning sign for the chip giant.

Sector-Wide Selloff and AI Memory Shortages Spur Panic
The selloff in AVGO mirrors a broader semiconductor sector downturn driven by two critical factors: 1) escalating supply chain disruptions in AI memory chips, as highlighted in sector news about DRAM and HBM shortages, and 2) renewed geopolitical tensions in the U.S.-China tech rivalry. The Nexperia dispute and Wingtech’s accusations of deception have amplified fears of operational instability in key chipmaking hubs. Meanwhile, Chinese AI startups like Moore Threads and Zhonghao Xinying are gaining traction, threatening U.S. dominance in high-margin memory markets. These dynamics have triggered a risk-off sentiment, with AVGO’s high dynamic P/E ratio (66.09) making it particularly vulnerable to profit expectations shifts.

Semiconductor Sector Under Pressure as Intel Drags Down
The semiconductor sector is broadly underperforming, with Intel (INTC) down 1.86% and Marvell (MRVL) also in negative territory. AVGO’s 5.17% drop outpaces the sector’s average decline, reflecting its premium valuation and exposure to AI infrastructure. The sector’s struggles are compounded by Micron’s $9.6B Hiroshima HBM plant and Samsung’s Giheung R&D complex, which signal long-term overcapacity risks. While UMC and Polar Semiconductor’s collaboration aims to boost U.S. chip production, these efforts remain months from materializing, leaving investors to grapple with near-term uncertainty.

Bearish Setup: Put Options and ETFs in Focus
• 200-day average: 281.43 (far below current price)
• RSI: 35.16 (oversold territory)
• MACD: 2.14 (bearish divergence with signal line at 8.14)
• Bollinger Bands: Price at $323.65, near lower band ($326.13)

AVGO’s technicals paint a bearish near-term picture, with RSI in oversold territory and MACD signaling weakening momentum. The stock is testing critical support at $326.13 (lower Bollinger Band) and the 30D support range of $339.81–$341.27. The Roundhill AVGO WeeklyPay ETF (AVGW) and Direxion Daily AVGO Bull 2X Shares (AVL) are down -6.86% and -10.39%, respectively, amplifying leveraged downside risks.

Top Options Picks:
• AVGO20251226P315 (Put, Strike: $315, Expiry: 12/26):
- IV: 43.16% (moderate)
- Leverage Ratio: 56.79%
- Delta: -0.3514 (moderate sensitivity)
- Theta: -0.0112 (minimal time decay)
- Gamma: 0.0161 (responsive to price swings)
- Turnover: 608,661 (high liquidity)
- Payoff (5% downside): $18.65 per contract
This put option offers a high leverage ratio and strong gamma, ideal for capitalizing on a potential breakdown below $326.13. The moderate IV ensures it’s not overpriced.

• AVGO20251226P312.5 (Put, Strike: $312.5, Expiry: 12/26):
- IV: 43.49% (moderate)
- Leverage Ratio: 66.51%
- Delta: -0.3121 (moderate sensitivity)
- Theta: -0.0419 (higher time decay)
- Gamma: 0.0152 (modest responsiveness)
- Turnover: 126,156 (solid liquidity)
- Payoff (5% downside): $21.15 per contract
This contract’s high leverage ratio and moderate IV make it a compelling choice for aggressive short-term bearish bets, though its higher theta requires a quicker price move.

Trading Outlook: If AVGO breaks below $326.13, the 315-strike put becomes a high-probability play. Aggressive bulls may consider the 320-strike call (AVGO20251226C320) if the stock bounces above $330, but the bearish technicals suggest caution.

Backtest Broadcom Stock Performance
The backtest of Broadcom Inc. (AVGO) after an intraday plunge of -5% from 2022 to the present shows favorable performance metrics. The 3-Day win rate is 56.59%, the 10-Day win rate is 61.77%, and the 30-Day win rate is 71.92%, indicating that the stock tends to recover positively in the short term following a significant drop. The maximum return during the backtest period was 14.41%, which occurred on day 59, suggesting that while there is volatility, AVGO can experience substantial gains in the aftermath of a steep decline.

Act Now: AVGO’s Breakdown Could Signal Sector-Wide Shift
AVGO’s 5.17% drop reflects a confluence of sector-wide pressures and company-specific vulnerabilities. With RSI in oversold territory and Bollinger Bands tightening, the stock is primed for a directional move—downside risks are amplified by the sector leader Intel’s -1.86% decline. Investors should monitor the $326.13 support level and the 315-strike put options for potential short-term gains. If the selloff persists, AVGO’s high dynamic P/E ratio may force a valuation correction. Watch for $326.13 breakdown or regulatory reaction in the Nexperia dispute.