Apple chip supplier Broadcom (AVGO) warned of a “broad-based slowdown” in the chip sector, related to the China trade war and Huawei ban. It’s the latest evidence that semiconductor demand won’t recover in 2019.
Chip sector weakness is bad news for the current stock market rally. Most market rallies tend to have chip stocks leading or at least participating. Chip stocks were strong for much of 2019, including Broadcom.
Chip stocks are a big part of overall market capitalization, especially the Nasdaq. Semiconductors are in virtually everything, so if chip stocks and demand are flagging, that’s not a good sign for end demand.
Broadcom stock plunged 8.5% to 257.70 late, signaling a gap down toward its late May lows. After tumbling in May along with other chip stocks, Broadcom stock rebounded for several sessions but hit resistance near its 50-day line.
Broadcom signed a new chip supply deal with Apple earlier this week, triggering a short-lived push toward the 50-day line.
Broadcom SHORT (Sell)
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