What Happened?
Shares of fabless chip and software maker Broadcom (NASDAQ: AVGO) fell 5.4% in the afternoon session after stocks pulled back (Nasdaq -1.5%, S&P 500 -1.5%) amid fresh concerns about trade tariffs. The pullback followed comments from President Trump clarifying the scope of his administration's 25% tariffs on Venezuela. He noted that it would apply to any country that does business with Venezuela. For example, 25% is on top of the already-in-place 20% tariff on China because China imports oil from Venezuela, which could translate to a 45% tariff on some Chinese goods. This announcement could significantly raise the operating costs for affected companies and institutions.
Adding to the market unease, the US President announced plans for new tariffs on auto imports before the planned "reciprocal" tariffs on April 2, 2025.
There were also reports that the U.S. had added more Chinese companies to its trade blacklist, citing national security concerns. As a result, these companies would now need government approval to purchase American technology. Among those affected were tech firms that depended heavily on advanced chips made by U.S. manufacturers, raising concerns about the US chip makers' ability to maintain strong sales in the Chinese market.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Broadcom? Access our full analysis report here, it’s free.
What The Market Is Telling Us
Broadcom’s shares are very volatile and have had 28 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 7 days ago when the stock gained 5% on the news that stocks rebounded to start the session amid continued market volatility after the Federal Open Market Committee kept rates at 4.25% to 4.50% in its March 2025 meeting. The Jerome Powell-led committee also hinted at two more rate cuts for the year, saying, "Uncertainty around the economy has grown."
The good news was that holding rates steady and signaling two additional cuts this year meant no surprises (the market dislikes surprises).
The bad news was that the Fed reduced its outlook growth to 1.7%, down from the previous projection of 2.1% in December. At the same time, the inflation outlook was raised to a 2.8% annual increase for core prices, up from the prior projection of 2.5%. This suggested the Fed saw the macro tilting towards a stagflation scenario, where inflation rises as economic growth slows.
Broadcom is down 22.7% since the beginning of the year, and at $179.22 per share, it is trading 28.3% below its 52-week high of $250 from December 2024. Investors who bought $1,000 worth of Broadcom’s shares 5 years ago would now be looking at an investment worth $7,370.
Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.
