Broadcom’s guidance sent the stock tumbling this week. A buying opportunity has emerged
Broadcom earnings report delivered on the top line yet forward guidance disappointed, which allows for a discounted entry. I want to use options to define risk and participate in a bounce of this high beta tech stock. Overall weakness via profit taking in tech should be short-lived. When you look at the Q2 earnings report , Broadcom actually delivered a highly profitable quarter. The issue was that investors may have priced in perfection: The headline beat : Q2 revenue of $22.19 billion, which actually beat the official consensus estimate of $22.13 billion. The “whisper” miss on AI: Investors have become conditioned by Nvidia-style dramatic guidance raises. Broadcom projected its Q3 AI chip revenue to land at $16 billion. While that is up massively year-over-year, the “whisper numbers” were sitting up at $17 billion. Because CEO Hock Tan didn’t aggressively hike/hype that forward number, algo trading programs immediately triggered selling, dropping the stock about 15% on the day. The non-AI backlog drag: Broadcom’s legacy, non-AI cyclical businesses (like enterprise storage and broadband routing) are recovering at a stable, gradual pace rather than skyrocketing. For short-term momentum traders, “stable and gradual” isn’t enough, that added to the selling pressure. Don’t think of Broadcom as a cyclical hardware chipmaker. They are a “fabless” infrastructure beast. They own one of the world’s most valuable portfolio of intellectual property for data connectivity and custom silicon, combined with a massive, recurring, high-margin enterprise software business via VMware. They design the brains and the plumbing of the internet, while letting foundries take on the capital risk of building the physical factories. Everyone looks at Nvidia as the “brains” because they make the high-profile graphics processing units (GPUs) that crunch the data. But the reality on the engineering floor is that Broadcom is the brain that makes those GPUs actually work together. Without Broadcom’s architectural designs, an AI data center is just a collection of very expensive, isolated silicon islands. With support on a year to date chart at $400, I am using that level to gain exposure. AVGO YTD mountain AVGO year to date The trade Sold the AVGO $400 7/17/2026 put for $22.75 Bought the AVGO $370 put for $9.75 Bought the AVGO $430 call for $17.75 This spread will cost and investor $5 and defines downside risk and presents unlimited profit above $435 in the event AVGO rebounds. AVGO was roughly trading $405 when this spread was established. DISCLOSURES: Kilburg’s Mango Growth ETF (GARY) just bought $AVGO. He is also long this spread All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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