Macro uncertainty and Huawei impact. That's what you are going to hear all day about why Broadcom (AVGO) had a highly unusual shortfall.
Broadcom's stock had been one of the great comeback stories until last night, as Hock Tan, the wily CEO, had seemed to be managing the downturn better than all the others, like Skyworks (SWKS) , Qorvo (QRVO) or NXP Semi (NXPI) .
Until last night, when we discovered that the Huawei blacklist might have cost them a $1 billion and the slowdown in their areas of tech another $1 billion.
I see panic everywhere in the semis because of this, as it confirms the decline in Micron Technology (MU) and Lam Research (LRCX) , among others, that has been happening for a week now.
Broadcom is too high if you just sliced off $2 billion in sales. But as always, if the U.S. were to come to the peace table, then both the Huawei and general slowdown problems could go away and we would simply be thinking about 5G.
But right now, Broadcom is at the heart of what I have been saying about Trump having the upper hand over Xi. Not since Obama trashed the Vegas strip by talking about the outrageousness of corporate junkets at the time of the Great Recession, have we seen a president care less about how American business was doing. The difference, of course, is that Obama course-corrected. Trump doesn't even care at all about the downturn in any of our companies.
I reiterate that it was good to see Tim Cook from Apple (AAPL) sit down with Trump yesterday, because I fear more from Trump putting a 25% tariff on all imports from China including Apple phones, than I fear a Chinese boycott. I worry that the president believes he can bring back Apple jobs to the U.S. from China by doing so. Of course, these jobs were never American jobs and it's not smart to try to seek a huge amount of sales from a country without putting up plants there.
I think that Xi, on the other hand, despite the president for life stuff, is at wits end about the successful encirclement of Huawei by Trump. There's $100 billion in revenue on the line from that state-sponsored enterprise. That's 4x Broadcom's revenue and it is the crown jewel of the communications empire. Trump's people are making the calculation that it is worth sacrificing Broadcom, Western Digital (WDC) , Micron, Skyworks, Qorvo, Intel (INTC) and Qualcomm (QCOM) on the altar of defeating the Chinese. Who would have thought a pro-business president would do that?
Now I know that the bears will be all over the semis right now. I think they should consider that the weakness only seems revelatory for Broadcom shareholders. You own Micron, you have been crushed for a very long time.
So even though the president means business hurting our business, if you sell Nvidia (NVDA) on this, I think it would be ill-advised. Look where some of these stocks are. Broadcom is the sign not that we are at a top. It's a sign that even Broadcom isn't immune from the vicious decline.
Now what will the advance look like?
