Investing.com — Wall Street had pushed largely higher on Thursday, as a surge in defensive healthcare stocks and improving sentiment around the Middle East outweighed a fall in the technology sector on a post-earnings plunge in Broadcom.
At 14:46 ET (18:46 GMT), the benchmark index added 0.5% to 7,592.98 points, while the blue-chip climbed 1.7% to 51,551.17 points. The tech-heavy had reversed course and turned higher, last up 0.2% to 26,907.70 points.
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Broadcom declines as earnings underwhelm lofty expectations
The furious rally in the artificial intelligence trade that has helped Wall Street shake off the Iran war and return to record levels took a breather on Thursday, as Broadcom slumped after its earnings report.
Despite quarterly revenue at the chip designer surging Y/Y on soaring demand for its AI semiconductor business, shares slid 12.6% as the company’s guidance failed to meet sky-high expectations. It should also be noted that Broadcom had seen a massive run-up ahead of the earnings and is sitting on a YTD advance of more than 38%.
Broadcom, whose services aid hyperscalers such as and OpenAI in the development of custom AI accelerator chips, kept its 2027 financial outlook unchanged, projecting AI semiconductor revenue of over $100 billion — leaving investors without the “beat and raise” cadence of returns anticipated from a company at the forefront of the AI boom. In the current quarter, top boss Hock Tan said AI chip revenue would stand at $16 billion, over triple that of a year ago.
“If investors were looking for evidence of the AI theme being overheated, then the reaction to Broadcom’s latest numbers provides it in spades,” Dan Coatsworth, head of markets at AJ Bell, said.
“The failure of Broadcom’s chief executive Hock Tan to lift the $100 billion AI chip revenue forecast for 2027 he gave in March also represented a failure to keep pace with runaway expectations,” he said.
“Broadcom may have emerged as a key player in the booming AI infrastructure market, with a particular expertise in the custom chips increasingly being used by the likes of Alphabet and Meta. However, just like its rival Nvidia, Broadcom is finding that meeting and even slightly beating forecasts is not enough when the market is holding it to such a high standard,” Coatsworth added.
Broadcom’s losses spilled over into other semiconductor names. , , and were among the top percentage losers on the Nasdaq Composite.
“At best, this market is suffering from what I would call AI-fatigue or even FOMO-fatigue or, at worse, a year 2000-like tech implosion could be right around the corner after all of these massive, unthinkable moves higher based on seemingly irrational capex spending in recent weeks and months,” Jake Dollarhide, CEO at Longbow Asset Management, told Investing.com.
Oil prices decline after Israel and Lebanon enter ceasefire
Turning to developments in the Middle East, Israel and Lebanon agreed to renew their shaky ceasefire, bolstering hopes for an eventual peace deal between the U.S. and Iran. An agreement between Washington and Tehran has been contingent upon a cessation to fighting in Lebanon, where U.S.-aligned Israeli forces have been battling Iran-backed Hezbollah militants.
Following a fourth round of U.S.-mediated discussions, both Israel and Lebanon said the truce would be “contingent on a complete cessation of Hezbollah fire and the evacuation of all Hezbollah operatives” from areas south of the Litani River in southern Lebanon.
“These steps will enable progress towards a comprehensive peace and security agreement,” a joint statement said. Hezbollah, notably, did not take part in the negotiations.
Oil prices fell after the ceasefire. , the global oil benchmark, were last down 2.7% to $95.22 a barrel. dropped 2.9% to $93.25 a barrel.
The ceasefire helped allay some concerns that overall diplomatic efforts to end the war had stalled. On Wednesday, U.S. President Donald Trump suggested that progress could be made in talks with Iran as soon as this weekend, while Iran’s foreign minister said contact with Washington had not been cut off. Earlier this week, media reports suggested that Tehran had halted sending messages to the U.S. through mediators.
Trump told his aides that he will not resume attacks on Iran unless U.S. forces are killed, the Wall Street Journal reported.
The White House is also possibly facing escalating demands at home to end the war. The House of Representatives, despite being controlled by Trump’s Republican party, voted in favor of a resolution blocking the president from continuing the conflict. The measure still needs Senate approval, as well as the backing of two-thirds majorities in both chambers to override a veto from Trump.
Focus on May jobs report
While the continued closure of the Strait of Hormuz has led to an inflationary shock, the U.S. economic calendar this week has largely been focused on the labor market. Market participants on Tuesday received a better-than-expected job openings reading for April, followed by strong job growth in the private sector on Wednesday.
After signs of cooling towards the end of last year, the U.S. labor market has rebounded, allowing the Federal Reserve to focus on the inflationary impact of surging oil prices. Last month, expectations of Fed interest rate hikes surged, which also led to traders dumping bonds and driving up U.S. Treasury yields.
On Friday, the May nonfarm payrolls report will likely give a major indication of whether the recent strength in the labor market is continuing.
“The bar is low for tomorrow’s nonfarm payrolls report, as real-time hiring indicators and alternative data points point to broad acceleration. I’m looking for a beat, with my estimate calling for a 120k gain amidst a 4.2% unemployment rate, which would be better than the 85k and 4.3% expected,” José Torres, senior economist at Interactive Brokers, said.
“The market is likely to react well to a number in this ballpark as a robust figure that isn’t too far above projections is conducive to tempered yields that could bolster the rally in cyclical stocks while contributing to an ongoing broadening,” he said.
“Additionally, the numbers are poised to quell anxieties about AI labor displacements, as the changes are more closely tied to funding needs for massive capital expenditures. Meanwhile, wages are getting cheaper relative to inflation, and workers across most sectors of the economy aren’t yet heavily threatened by modern technology, factors that can ease concerns about the potential for higher structural joblessness,” Torres added.
surges in market debt
Looking at Thursday’s active stocks, Honeywell spinoff Quantinuum saw a strong market debut on the Nasdaq, with shares opening at $68 versus an initial public offering price (IPO) of $60. The company is a major name in the quantum computing space.
The IPO comes ahead of the highly anticipated debuts of Elon Musk’s SpaceX and AI startup Anthropic. The former on Wednesday priced its offering at $135 per share, raising $75 billion, while the latter has confidentially filed for an IPO, beating rival OpenAI in the first step to becoming a public company.
Elsewhere, shed 4% after issuing disappointing guidance.
Ambar Warrick and Scott Kanowsky contributed to this article
