The technology giant’s message raises concerns – Did the stock market’s artificial intelligence rally take a bad hit?

The long rising streak of the S&P 500 index was broken on Wednesday, and the technology-focused Nasdaq also weakened by 0.9 percent. At least the tightening of tensions between the United States and Iran and the rise in oil prices raised concerns on the market.

However, the rise in the stock market has not depended on geopolitics or the energy market for a while, as artificial intelligence-related companies have accounted for the lion’s share of the profits. Measured since the start of the Iran war, the S&P 500 index has returned around 30 percent, but the S&P index, which was purged of the IT sector, was still down one percent at the beginning of June.

The semiconductor sector, on the other hand, has grown at a tremendous pace. In one year, the increase has already accumulated by around 180 percent. Investors have whipped up almost all companies that have anything to do with chips, artificial intelligence or data centers. For example, a memory manufacturer Micron’s the stock has risen 240 percent this year, and the company has joined the prestigious trillionaire club.

Investors did not like the guidance

On Wednesday, the artificial intelligence drug experienced at least a momentary bump when the semiconductor giant Broadcom reported the result of the second quarter of its fiscal year. In addition to semiconductors, the company designs and manufactures software infrastructure that is used in data centers and network systems, for example. At the beginning of June, the company’s market value was over two thousand billion dollars, and it has been taken over by a car manufacturer Tesla’s place in the so-called “big seven”, i.e. among the largest companies on Wall Street.

The company doesn’t command the headlines in the same way as its better-known peers, but its role in building the current AI infrastructure is significant. Broadcom acts as a strategic partner that helps hyperscalers develop their own, customized AI solutions.

The company’s results were strong as expected, but the guidance left much to be desired. The company guided that the turnover of artificial intelligence semiconductors will settle at 16 billion dollars in the current quarter, while analysts predicted an average of 17.2 billion dollars. For the entire fiscal year, the turnover of the products in question was instructed to settle at 56 billion dollars, while in the analysts’ papers the forecast was 57.6 billion dollars.

So far, companies in the industry have mostly surprised on the upside, so Broadcom’s forecasts raised concerns about slower-than-expected growth in AI investments. Valuations on the stock exchanges have risen to record levels, but so far the support has been sought from ever-increasing profit forecasts.

The company’s stock fell by about 14 percent on the secondary market. On the other hand, high expectations had been loaded into the share price, and the rise had accumulated almost the same amount during the last five trading days.

The company has numerous contracts for the delivery of products, among other things Alphabetille, Anthropicille and metalsbut it is still unclear to investors how the turnover brought by long-term contracts will be timed in the coming quarters. Broadcom is currently very dependent on the willingness of hyperscalers to invest in data centers.

The shares of many benchmark companies in the industry fell on the secondary market due to sympathy. Chip manufacturer AMD,’s share was down by 3.2 percent, Intel’s the stock down 1.8 percent and TSMC,’s share decreased by 1.2 percent. One of the company’s main competitors Nvidia’s the stock fell only 0.2 percent.

On Wall Street, the futures of the technology-focused Nasdaq showed a fall of about 0.5 percent in the morning Finnish time.