The AI Profitability Debate Triggered by Broadcom's Earnings: Structural Causes Behind the US Tech Sell-off

A New Hurdle: Proving AI Profitability

In early June 2026, global financial markets entered a phase of reassessing valuations related to Artificial Intelligence (AI). Amid consistently upward-revised market expectations, Broadcom's earnings report served as a key catalyst, triggering widespread profit-taking across the technology sector. This suggests more than just short-term volatility; the market is now demanding 'immediate and overwhelming profitability' from AI infrastructure companies, looking beyond mere 'future growth potential.'

The Broadcom Paradox: Strong Earnings vs. Constrained Guidance

Broadcom's financial results for the second quarter of fiscal year 2026 exceeded market expectations. The company demonstrated strong fundamentals by reporting quarterly revenue of $22.19 billion. However, market anxiety focused not on past performance, but on future guidance.

• Falling Short on Short-term Guidance: Broadcom's guidance for Q3 AI chip-related revenue was approximately $16 billion, which fell short of the $17.2 billion average forecast by Wall Street analysts.
• Maintained Long-term Outlook: The company's decision to maintain its long-term AI revenue outlook for fiscal year 2027, rather than raising it, provided an excuse for investors—accustomed to relentless upward revisions—to offload their shares in disappointment.

Profit-Taking in a Market 'Priced for Perfection'

The core logic driving the Nasdaq index rally over the past year has been the anticipation of infinite demand fueled by the expansion of the AI ecosystem. These expectations were already priced into the relevant companies' stocks as 'perfection.' Broadcom's conservative guidance fractured this perfection, activating the classic market dynamic of 'sell the news.'

Spillover Effects on Nvidia and the Nasdaq

The concerns originating from Broadcom quickly escalated into a broad sell-off across major tech stocks, including the AI chip leader Nvidia and AMD. This is analyzed not as a deterioration of individual company fundamentals, but rather as simultaneous profit-taking driven by portfolio rebalancing and risk management. Consequently, the tech-heavy Nasdaq index experienced a steep decline. The impact reverberated across global markets, evidenced by the South Korean Kospi experiencing a sharp drop of nearly 9% and triggering a circuit breaker amid expanded foreign selling.

Macro Variables Weigh In: Strong Jobs Delay Rate Cuts

Another pillar exacerbating the downward pressure on the US stock market was macroeconomic data. Coinciding with the tech stock sell-off, the US May employment report showed surprising strength, significantly beating market expectations. This rapidly fueled concerns that the Federal Reserve's (Fed) entry into an interest rate cut cycle might be delayed.

Strong employment stimulates fears of entrenched inflation, which translates directly into rising US bond yields and a stronger dollar. The intraday surge in the KRW/USD exchange rate in the Seoul foreign exchange market aligns with this trend. The prospect of 'higher for longer' interest rates increases the discount rate on future cash flows, acting as a direct hit to high-valuation growth and technology stocks.

Short-term Correction or Fundamental Shift?

Market analysts are leaning towards interpreting this decline as a healthy correction process to cool down overheated valuations, rather than the end of the AI cycle. Structural investments for building AI infrastructure, such as data center expansion and demand for custom silicon, are still actively underway.

In conclusion, the current market dynamic is a process of reconciling the gap between the pace of corporate earnings growth and elevated market expectations. It is time for investors to move away from blind growth optimism and prepare for an earnings-driven market, where the actual cash-generating ability and valuation justification of individual companies are rigorously verified.