[New York Stocks] Shift from AI Semiconductors to Defensive Stocks... Mixed Close

Broadcom Earnings Miss Market Expectations
Defensive Stocks Rally
International Oil Prices End Lower

Broadcom's earnings fell short of market expectations, triggering a wave of profit-taking in semiconductor stocks that had been leading the artificial intelligence (AI) rally. As investors shifted funds to defensive stocks and other sectors, the three major New York stock indices ended mixed on June 4 (local time).

On the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 51,561.93, up 874.86 points (1.73%) from the previous session. The S&P 500 index, focused on large-cap stocks, rose 30.63 points (0.41%) to 7,584.31, while the tech-heavy Nasdaq index ended at 26,830.958, down 23.018 points (0.09%).

New York Stock Exchange. New York, USA - Photo by Yoonju Hwang

Broadcom's earnings determined the market's direction that day. The company's share price recorded its steepest drop since January 2025, dragging down major sector indices by 2.2%. Given the strong enthusiasm for AI investments, the fact that Broadcom's earnings fell short of expectations led to a broader sell-off of AI-related stocks on the New York market.

Broadcom announced that its revenue for the second quarter of fiscal year 2026 (February to April 2026) was $22.187 billion, up 48% year-on-year. However, this figure fell short of the market expectation of $22.27 billion.

For the third quarter, Broadcom projected AI semiconductor revenue of $16 billion, which was also slightly below the market estimate of $16.36 billion. Revenue from the infrastructure segment came in at $7.18 billion, less than the market forecast of $7.32 billion.

Bloomberg reported, "Due to Broadcom's weak earnings outlook, Wall Street rotated funds out of semiconductor manufacturers into various other sectors, putting AI-related investments that have been driving the market to the test."

Broadcom plunged by nearly 16% during intraday trading. Micron Technology also dropped by nearly 8%, and other semiconductor stocks such as AMD, Qualcomm, and Marvell Technology all finished lower.

Dennis Palmer, Chief Investment Officer at Montis Financial, said, "Even after a remarkable earnings season, AI-related investment remains active, but the extraordinary rally that has lasted for over two months is starting to tire out." He added, "The performance of semiconductor stocks is a reminder that AI-related equities are not all the same and that each stock has different expectations priced in."

Mark Malek, Chief Investment Officer at Siebert Financial, assessed that the AI industry is entering a more mature phase, where both the quality of the story and sales growth matter. Malek noted, "The market no longer pays unlimited premiums for products simply labeled 'AI.' The issue was not Broadcom's earnings themselves, but rather the environment in which its share price had been set."

Matt Maley of Miller Tabak said, "The rebound since the March low has been extremely strong, with semiconductor stocks in particular showing a nearly parabolic rise." He analyzed, "If Broadcom's earnings announcement becomes a catalyst for a correction that lasts more than a day or two, it could actually have a positive effect on the stock market."

By contrast, UnitedHealth and JPMorgan Chase closed up 5.16% and 3.34%, respectively, helping to support the Dow Jones index. Walmart (up 0.73%), Costco (up 1.09%), and Eli Lilly (up 4.31%) also finished higher.

With AI and the Iran war continuing to be major issues, the U.S. employment data to be released this week is expected to play a crucial role, according to Sevens Report. Tom of Sevens Report pointed out that, in the short term, the data needs to come in at a "just right" level for the market to continue rising.

Meanwhile, international oil prices fell. On the New York Mercantile Exchange, West Texas Intermediate (WTI) crude for July delivery closed at $93.04 per barrel, down 3.1% from the previous session. On the ICE Futures Exchange, Brent crude for August delivery fell 2.8% to $95.03 per barrel.

This content was produced with the assistance of AI translation services.