Why Broadcom's Post-Earnings Dip Presents a Smart Entry Point for Tech Investors—Here's How to Play It Safe with ETFs

Broadcom Inc. (AVGO) delivered impressive fiscal fourth-quarter 2025 results that should have delighted investors, yet the market responded with a swift 11.4% sell-off—a classic case of “sell the news” despite strong fundamentals. The disconnect reveals fascinating market psychology and creates a compelling opportunity for those willing to look beyond single-stock volatility.

The Numbers Tell a Different Story

Let’s start with what Broadcom actually achieved in Q4 fiscal 2025. Adjusted earnings per share hit $1.95, crushing the Zacks Consensus Estimate by 4.3% and jumping 37.3% year-over-year. Revenue climbed to $18.02 billion, surging 28.2% annually and beating consensus by 2.9%. Organic revenue growth came in at a robust 24% year-over-year. Breaking down by segment, semiconductor solutions revenues exploded 35% year-over-year while infrastructure software climbed 19%.

These aren’t just good numbers—they’re exceptional growth metrics for a company of AVGO’s scale. Yet somehow, investors punished the stock. Why?

The AI Margin Conundrum

The culprit appears to be margin anxiety rather than revenue concerns. While AVGO’s AI business posted solid top-line expansion in Q4, management signaled a troubling 100-basis-point sequential gross margin compression expected in the fiscal first quarter. Additionally, the company’s total AI backlog, while exceeding $73 billion, fell short of what some analysts anticipated. In a market increasingly paranoid about AI bubble dynamics, this proved enough to spook investors already jittery about sector valuations.

However, looking at actual customer commitments tells a different story. During Q4, Broadcom revealed Anthropic as a major AI accelerator customer with $11 billion in fresh orders for AVGO’s TPU Ironwood racks scheduled for late 2026 delivery. Earlier, OpenAI inked a multi-year deployment agreement with Broadcom for 10 gigawatts of custom AI accelerators. These aren’t speculative orders—they’re concrete capital commitments from the industry’s leading AI developers.

What Comes Next Matters Most

Looking forward, management projects AI semiconductor revenues will roughly double to $8.2 billion in fiscal Q1, propelled by custom AI accelerators and Ethernet AI switches. That’s the kind of trajectory that typically justifies premium valuations, not punishments.

For individual investors, however, direct AVGO exposure carries concentrated risk. The company’s custom AI chip division depends heavily on a handful of hyperscale clients—a structural vulnerability that could create sudden revenue volatility if any major customer shifts toward proprietary in-house chip development or moderates spending.

The ETF Solution: Diversified AI Hardware Exposure

Rather than betting everything on a single chipmaker, sophisticated investors can capture Broadcom’s upside potential while hedging against company-specific disruption through strategically selected semiconductor and tech ETFs that carry substantial AVGO weightings.

iShares Semiconductor ETF (SOXX) offers a focused play across 30 U.S. semiconductor design, manufacturing, and distribution companies. AVGO commands the second-largest position at 7.78%. Year-to-date performance has climbed 39.8%. The fund charges just 34 basis points annually and carries a Zacks ETF Rank #1 (Strong Buy) rating.

VanEck Semiconductor ETF (SMH) provides comparable exposure through 26 semiconductor production and equipment firms. AVGO ranks third with 8.87% fund weight. The ETF has appreciated 46.2% year-to-date with 35 basis points in annual fees and also sports Zacks ETF Rank #1.

Fidelity MSCI Information Technology Index ETF (FTEC) casts a wider net across 292 U.S. information technology companies, with AVGO as the fourth-largest holding at 5.20% of assets. Year-to-date gains total 22% with minimal 8 basis point fees—among the most cost-efficient options available. Zacks ETF Rank #1.

iShares U.S. Technology ETF (IYW) rounds out the selection with 140 companies spanning electronics, computer software and hardware, and information technology sectors. AVGO represents the fourth position at 3.47% weighting. Annual returns of 24.7% year-to-date, 38 basis points in fees, and Zacks ETF Rank #1 status.

The Strategic Takeaway

Broadcom’s temporary stock punishment despite stellar execution and accelerating AI revenue growth represents the kind of fear-driven mispricing that creates opportunities. Whether accessed through specialized semiconductor ETFs or broader technology funds, AVGO exposure remains compelling for those with conviction in AI infrastructure’s long-term secular growth trajectory—but only within a properly diversified portfolio structure.