The Overnight Picture

Broadcom (AVGO) is the unavoidable story heading into Thursday's open. The company reported a 48% rise in total quarterly revenue and a 143% surge in AI semiconductor sales — numbers that would have triggered a rally in almost any other environment. Instead, its guidance for $16 billion in AI chip revenue in the fiscal third quarter fell short of what investors had priced in, and the stock dropped 13%.

The selloff spread. Marvell Technology came under pressure alongside Broadcom, and Asian equity indices retreated overnight as the news filtered through. U.S. futures pointed lower heading into the New York open. The episode is a sharp reminder of how elevated the expectations bar has become for AI-exposed hardware names: absolute growth of 143% was not enough.

Adding pressure from a different direction, strong U.S. economic data released earlier this week revived speculation that the Federal Reserve may need to keep rates higher for longer — or even consider another hike. That combination, a high-profile earnings miss and renewed rate anxiety, gave investors two independent reasons to reduce risk in the same session.

Today's Key Themes

Theme 1: Guidance vs. reality in AI semiconductors. Broadcom's result crystallizes a tension that has been building in chip stocks for months. The underlying demand for AI compute is real — TSMC (TSM) CEO C.C. Wei said at the company's annual shareholders' meeting that AI-driven chip demand will outpace the company's manufacturing capacity for several more years. He also flagged rising component costs and signaled interest in raising chip prices, a move that would ripple through the supply chains of major customers including Nvidia (NVDA) and Intel.

So the structural case for the AI trade remains intact. What Thursday tests is whether investors are willing to hold that view through a quarter where the headline number disappointed. Broadcom's miss may reflect a timing issue in customer order flows rather than a slowdown in end demand — but that distinction will take time and further data to confirm.

Theme 2: The rate-hike wildcard. Markets had largely settled into an expectation of Fed rate cuts later this year. The stronger-than-expected U.S. economic data that crossed earlier this week disrupted that consensus. Higher-for-longer rates are a meaningful headwind for growth and technology stocks, which carry elevated valuations built on discounted future earnings. If Thursday brings any Fed speaker commentary that leans hawkish, expect it to amplify the pressure already coming from the Broadcom selloff.

Theme 3: The software-hardware split. Not all of tech is under pressure. Salesforce (CRM) gained 7.4% after reporting strong fiscal first-quarter 2027 results and announcing a significant investment in AI startup Anthropic. Its Agentforce platform — which automates business workflows using AI agents — was highlighted as a key growth driver. Hewlett Packard Enterprise also reported a record quarter on AI server demand. The divergence between enterprise software names with clear AI monetization stories and hardware companies facing guidance scrutiny is one of the more important fault lines in the sector right now.

Capital Allocation: Berkshire's Dual Move

One story that deserves attention beyond the semiconductor noise: Berkshire Hathaway (BRK.A), under new CEO Greg Abel, is making two significant capital commitments simultaneously. The conglomerate is acquiring homebuilder Taylor Morrison Home Corporation, a notable bet on the U.S. housing market, and has committed $10 billion to support an equity raise by Alphabet tied to AI infrastructure investment — part of a $84.75 billion raise, one of the largest on record.

The dual moves signal that Abel is willing to deploy Berkshire's substantial cash reserves across both traditional industries and the AI buildout. Berkshire's historical caution around technology makes the Alphabet commitment particularly notable. It suggests the new leadership views AI infrastructure as a sufficiently mature, capital-intensive business to warrant the kind of large, long-duration investment Berkshire has traditionally reserved for railroads and utilities.

Costco (COST) also reported a solid fiscal third quarter, with net income of $2.19 billion and diluted EPS of $4.93, lifted by higher gasoline sales and continued membership growth. The result reinforces that the warehouse retail model continues to hold consumer loyalty in an uncertain economic environment — a quiet positive for the consumer staples sector that may get lost in the semiconductor headlines today.

The Calendar

The primary scheduled catalyst to watch Thursday is any Federal Reserve commentary following the stronger U.S. economic data. No specific Fed speakers were confirmed in available briefs, but any remarks touching on the rate path will be closely parsed given how quickly rate-hike speculation has re-entered the conversation.

The Computex and GTC Taipei technology conferences continue to run this week, and further guidance or product commentary from semiconductor companies at those venues could influence AI trade sentiment during the session. Watch for any remarks from Nvidia or its supply chain partners that either validate or complicate the TSMC supply-scarcity thesis.

No major earnings reports are confirmed as scheduled for Thursday in the current brief. The most relevant post-earnings dynamic will be any analyst follow-up calls or price target revisions on AVGO, which could set the tone for how the broader chip sector trades through the day.

Watch List

AVGO — The obvious focus. Watch whether the stock finds a floor after its 13% drop or whether selling extends as analysts reprice the AI revenue trajectory. Any management commentary on the nature of the guidance shortfall — timing versus demand — will be critical.

TSM and NVDA — TSMC's structural supply warning is a double-edged signal. It validates long-run AI demand but implies constraints on how quickly the infrastructure buildout can accelerate. Nvidia, as TSMC's largest advanced-node customer, sits at the center of that dynamic.

CRM — Salesforce's 7.4% gain is a data point in the software-versus-hardware debate. If enterprise software names hold their gains while chip stocks remain under pressure, it signals a rotation within tech rather than a wholesale retreat from the AI trade.

Rate-sensitive sectors — Financials and utilities will react to any Fed commentary. If rate-hike speculation firms up, expect the yield curve to steepen and rate-sensitive equities to come under additional pressure.

BRK.A and GOOG — The Berkshire-Alphabet deal is large enough to move both stocks. Watch for any institutional reaction to the $84.75 billion equity raise and what it implies for Alphabet's capital expenditure trajectory in AI infrastructure.