Broadcom's steepest three-day drop in overfive years has the chip maker falling down the ranks of the largest U.S. companies.
Shares of Broadcom (AVGO) lost 5.6% onMonday, capping a 17.7% three-day slide that's their worst such stretch since
March 18, 2020, according to Dow Jones Market Data. That persistent pressure
meant that it only took a fractional Monday gain for Meta's stock (META) to put
the Facebook parent company back in the No. 6 spot among the largest U.S.
companies by market capitalization.
Meta finished the day with a market cap of$1.632 trillion, while Broadcom trailed at $1.605 trillion, according to Dow
Jones Market Data.
The Facebook parent company has somewhatfallen out of favor with investors recently, owing to fears about the company's
artificial-intelligence spending and the company's ability to monetize AI. But
since then, a Bloomberg News report said the company could pare back its
spending on the metaverse, which had been another area of expense concern.
See more: Meta's stock slide erases $215billion in market value, as Wall Street pans 'runaway' AI spending
Last week, Morgan Stanley's Brian Nowakmaintained his overweight rating on Meta's stock. Its monthslong selloff, in
his view, offered investors a chance to buy up a "Magnificent Seven"
winner for cheap.
"Meta remains one of a handful ofcompanies that can leverage its leading data, distribution and investments in
AI to drive earnings power and tech leadership," he said in a note.
Meta's revenue increased 26% in the lastquarter, and the company said AI has helped improve its advertising algorithms.
Nowak thinks the trend can continue and drive further revenue increases.
Read: Meta's stock may actually be anoverlooked AI winner. Why bulls say to buy the dip.
Meanwhile, Broadcom's stock momentum iscooling in the wake of the company's earnings report last week, which left
investors with questions about the specifics of its AI opportunity.
TD Cowen analyst Joshua Buchalter saidinvestors had gone into the earnings report last Thursday excited about
Broadcom's blossoming relationship with OpenAI. But it was unclear from
Broadcom's disclosures how that business is expected to translate into revenue
and over what time period.
Buchalter added that investors were likelymore disheartened by Broadcom's announcement of a fifth unnamed customer that
it will deliver $1 billion of custom chips to late next year. That was less
than what Wall Street was expecting in OpenAI contributions, leading some
analysts to believe the mystery customer is a different player. But the
uncertainty hasn't sat well with investors.
Buchalter, for his part, said he doesn'tthink anything "material has changed" between Broadcom and OpenAI,
and that the chip maker is not counting the project yet since it's still being
figured out. As the work between the companies advances, he said Broadcom's
backlog should "inflect meaningfully."