What Happened?

A number of stocks jumped in the afternoon session after software giant Oracle (ORCL) boosted its outlook, citing booming demand for its cloud services from artificial intelligence firms. 

Oracle's shares soared after the announcement, creating a positive ripple effect across the semiconductor industry. The surge in demand for Oracle's cloud infrastructure from AI companies highlights the massive computing capacity required to compete in the AI race. This translates into significant investment in the underlying hardware, directly benefiting AI chipmakers such as Nvidia, AMD, and Broadcom. The positive sentiment underscores what some analysts call an ongoing “AI supercycle,” reinforcing investor confidence that the demand for advanced data center chips and related products remains robust.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Processors and Graphics Chips company Broadcom (NASDAQ: AVGO) jumped 8.2%. Is now the time to buy Broadcom? Access our full analysis report here, it’s free.
• Processors and Graphics Chips company Penguin Solutions (NASDAQ: PENG) jumped 3.5%. Is now the time to buy Penguin Solutions? Access our full analysis report here, it’s free.

Zooming In On Broadcom (AVGO)

Broadcom’s shares are very volatile and have had 24 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 2 days ago when the stock gained 3.9% on the news that it continued a rally sparked by the announcement of a massive $10 billion AI chip order and a strong quarterly earnings report. 

The positive momentum follows the company's report late last week, where fiscal third-quarter revenue grew 22% year-over-year to $15.95 billion, beating expectations. The growth was driven by Broadcom's AI-related sales, which climbed an impressive 63% to $5.2 billion. Adding to the bullish sentiment, the company revealed the blockbuster $10 billion order for its custom AI chips came from a new customer, which sources have identified as OpenAI. Broadcom also raised its sales outlook, guiding for fourth-quarter revenue of approximately $17.4 billion, reinforcing its crucial role in the booming AI infrastructure market.

Broadcom is up 57.4% since the beginning of the year, and at $365.11 per share, has set a new 52-week high. Investors who bought $1,000 worth of Broadcom’s shares 5 years ago would now be looking at an investment worth $10,223.

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