Broadcom's Post-Earnings Dip Signals Opportunity: Top ETFs for AI Chip Exposure

Broadcom Inc. (AVGO) experienced an 11.4% share price correction following its fourth-quarter fiscal 2025 earnings release, despite surpassing analyst expectations on both earnings and revenue fronts. While the immediate market reaction appeared negative, savvy investors recognize this pullback as a potential entry point into a company positioned at the forefront of AI infrastructure development.

Why the Market Overreacted

The sell-off stemmed from several factors that temporarily spooked investors. Management flagged a 100-basis-point sequential decline in gross margin for the first quarter of fiscal 2026 amid AI business expansion. Additionally, the company’s total AI backlog of $73 billion, while substantial, fell short of some analyst projections. These margin concerns, combined with broader sentiment worries about AI valuation and potential bubble risks, triggered the sharp correction.

However, a closer examination of Broadcom’s fundamentals and forward guidance suggests the market may have overlooked the company’s strong long-term trajectory.

Broadcom’s Q4 Fiscal 2025 Performance: The Numbers Tell a Different Story

The company’s results paint a picture of robust growth across multiple dimensions:

• Earnings: Adjusted EPS of $1.95 surpassed Zacks Consensus Estimate by 4.3% and grew 37.3% year-over-year
• Revenue: Top line reached $18.02 billion, up 28.2% year-over-year and beating estimates by 2.9%
• Organic Growth: Achieved 24% organic revenue expansion
• Segment Performance: Semiconductor solutions surged 35% YoY; infrastructure software climbed 19% YoY
• Balance Sheet: Cash holdings of $16.18 billion; long-term debt at $61.98 billion as of November 2, 2025

During fiscal 2025, Broadcom returned $17.5 billion to shareholders through $11.1 billion in dividends and $6.4 billion in share buybacks—demonstrating management confidence in long-term value creation.

The AI Growth Thesis Remains Intact

Despite margin pressures in the near term, Broadcom’s AI semiconductor revenue is projected to double year-over-year to $8.2 billion in Q1 fiscal 2026. This growth will be driven by custom AI accelerators and Ethernet AI switches serving hyperscale data center operators.

Recent developments underscore the company’s critical role in AI infrastructure:

• OpenAI Partnership: In October 2025, OpenAI signed a multi-year agreement with Broadcom to deploy 10 gigawatts of custom AI accelerators
• Anthropic Expansion: Broadcom revealed Anthropic as its fourth major AI customer during the earnings call, which placed an additional $11 billion in orders for TPU Ironwood racks, with deliveries expected in late 2026

Mitigating Single-Stock Risk: The ETF Strategy

While Broadcom’s growth potential appears compelling, direct stock ownership carries concentration risk. A large portion of revenues derives from a handful of hyperscale customers, creating vulnerability should any major client shift to in-house chip development or reduce orders.

For investors seeking Broadcom exposure without bearing full single-company volatility, Exchange-Traded Funds offer a prudent alternative:

iShares Semiconductor ETF (SOXX)

• Provides access to 30 U.S. semiconductor companies; AVGO represents 7.78% of holdings
• Year-to-date performance: +39.8%
• Expense ratio: 34 basis points
• Zacks Rank: #1 (Strong Buy)

VanEck Semiconductor ETF (SMH)

• Tracks 26 semiconductor and equipment manufacturers; AVGO holds 8.87% weighting
• Year-to-date return: +46.2%
• Expense ratio: 35 basis points
• Zacks Rank: #1

Fidelity MSCI Information Technology Index ETF (FTEC)

• Offers broad exposure to 292 U.S. tech companies; AVGO accounts for 5.20%
• Year-to-date performance: +22.0%
• Expense ratio: 8 basis points (lowest among options)
• Zacks Rank: #1

iShares U.S. Technology ETF (IYW)

• Encompasses 140 companies across electronics, software, hardware, and IT; AVGO represents 3.47%
• Year-to-date return: +24.7%
• Expense ratio: 38 basis points
• Zacks Rank: #1

Market Reassessment Underway

Post-earnings momentum has begun shifting. AVGO traded 0.5% higher in pre-market activity on December 15, 2025. Bank of America analysts subsequently raised their fiscal 2026-2027 pro forma EPS estimates by 8% each, signaling renewed conviction in the company’s trajectory.

The Bottom Line

Broadcom’s recent pullback despite beating expectations represents a classic case of market overreaction to near-term margin headwinds while overlooking exceptional long-term growth drivers. The $73 billion AI backlog, multi-year contracts with industry leaders, and projected 100% revenue growth in AI semiconductors position the company for sustained outperformance.

For investors comfortable with Broadcom’s opportunity, ETF vehicles provide efficient entry points that balance attractive returns potential against individual stock risks. The combination of strong secular AI tailwinds and temporary valuation dislocation may create an attractive window for portfolio builders.