TL;DR

Broadcom (AVGO) fell nearly 14% Thursday after delivering record AI chip revenue but missing on software sales and declining to raise its full-year AI forecast. That single-stock collapse is pulling the Nasdaq Composite down 1.15% - adding a second layer of pressure on top of Wednesday's war-driven selloff, when the Dow dropped 619 points and the S&P 500 lost 0.74%. Bitcoin has now fallen below its pre-conflict price, trading near $62,000 as institutional ETF outflows persist. The Dow is recovering strongly - up around 841 points by midday - helped by a modest dip in oil prices. But until the Strait of Hormuz reopens and the Fed's rate path clarifies, markets remain split between a value recovery and a tech correction.

What Happened

Broadcom reported Q2 fiscal 2026 results after Tuesday's close. AI chip revenue hit a record $10.8 billion, up 143% year-over-year. But infrastructure software came in at $7.18 billion, below the $7.32 billion analyst consensus. More importantly, management declined to raise its full-year AI semiconductor forecast - a move markets had been expecting given the pace of AI infrastructure orders. Shares fell as much as 15% intraday before settling around a 13.77% loss on Thursday morning, according to Yahoo Finance. The Philadelphia Semiconductor Index (SOX) tracked AVGO lower, transmitting pressure across the Nasdaq Composite.

The Broadcom decline compounds what was already a geopolitically driven selloff from the prior session. On Wednesday, the Dow Jones Industrial Average dropped 619 points, the S&P 500 lost 0.74%, and the Nasdaq Composite fell 0.89%, according to Trading Economics. Fresh exchanges of strikes between the United States and Iran cast further doubt on the fragile ceasefire. Iran struck Kuwait International Airport overnight Wednesday, killing one person according to Kuwait's Ministry of Foreign Affairs. The US Central Command (CENTCOM) described its own actions as defensive strikes in response to perceived maritime threats. The Strait of Hormuz - which carried roughly one-fifth of global oil demand before the conflict started in late February - remains effectively closed to US- and Western-allied shipping.

On Thursday, a partial recovery is underway in parts of the market. The Dow rose roughly 841 points, or about 1.7%, by 11:15 a.m. ET, led by consumer and energy stocks as WTI crude dipped toward $92.83 per barrel from near $95 overnight. The S&P 500 edged up 0.2%. Technology stocks are absorbing a double hit from the Broadcom earnings shock and persistent pressure from 10-year Treasury yields near 4.5%.

Bitcoin opened near $64,039 on Thursday and fell as low as $62,257 by 7:40 a.m. ET - a roughly 4% drop from Wednesday's opening price and below price levels that prevailed before the US-Iran conflict began, according to Yahoo Finance. Ethereum (ETH) opened at $1,810 and fell further to near $1,776, down about 2.5%. In our tracking of market data at ChartDojo, the crypto drawdown is moving in close step with the spike in real yields and the negative shift in institutional ETF flows - a dynamic that has accelerated over the past four sessions.

The 10-year Treasury yield sits near 4.5%, with the 30-year near 4.99%. Wednesday's ADP employment report for May came in stronger than expected, and ISM services data held up, reinforcing the case for a Federal Reserve rate increase before year-end. The CME FedWatch Tool shows markets now pricing at least one additional hike - a shift that is compressing valuations on long-duration assets across both equities and crypto.

Why Markets Moved

Four forces converged this week to produce the current market split.

The US-Iran conflict entered a more acute phase. Fresh strikes on Wednesday, confirmed by CNBC, the New York Times, and Reuters, undermined progress toward reopening the Strait of Hormuz. Peace talks that had drawn cautious optimism earlier in the week are now stalled, as we reported Wednesday when fresh strikes first broke the truce. Until shipping resumes, the global oil market is operating with a supply shortfall that keeps Brent crude near $97 per barrel, even after Thursday's modest pullback.

Broadcom's miss on software revenue raised a pointed question for AI-driven tech valuations. Record AI chip revenue ($10.8 billion, up 143%) confirmed that demand for AI infrastructure hardware is real. But the software shortfall, combined with a flat full-year forecast, signaled that the AI monetization story has not spread evenly across the company's business lines. When a company of Broadcom's scale misses on that dimension, investors reduce the premium they are willing to pay for AI-adjacent names more broadly.

Rising yields are squeezing the math on expensive growth stocks and crypto. Higher oil prices historically feed through to inflation expectations. The strong ADP report confirmed the labor market is not slowing fast enough to give the Fed room to cut. Rate hike pricing has moved decisively, pressuring the present value of future earnings for long-duration tech and pushing borrowing costs higher across the board.

Bitcoin's correlation with risk assets is on full display. The same combination of rising real yields, geopolitical uncertainty, and negative institutional flows that is hurting equities is driving crypto lower. High-conviction BTC holders are reportedly shifting to the sell side at current levels, according to CNBC - a signal that differs from typical retail selling and adds structural downside pressure.

Implications for Traders

Equity traders (stocks and index futures): The Dow's rebound Thursday highlights a rotation rather than a broad market recovery. Energy, consumer staples, and financials are outperforming as oil eases. Technology faces compounding headwinds: Broadcom's forward guidance cut sector confidence in AI spending's breadth, and yields near 4.5% reduce the present value of future earnings. The divergence between Dow futures (tracking higher) and Nasdaq-100 futures (under pressure) is the clearest expression of today's split. S&P 500 support near Wednesday's close and resistance at Tuesday's all-time high are the key technical levels into Friday.

Futures traders: Crude oil is the central futures story. WTI around $92 to $95 and Brent near $97 reflect a geopolitical risk premium built from the Hormuz disruption. EIA data this week showed a sixth consecutive weekly US crude inventory decline of 7.97 million barrels - the largest single-week draw since February and well above the 4 million barrel consensus estimate. That inventory picture is structurally supportive for oil prices even if some geopolitical tension eases near-term. Natural gas and shipping-cost futures have also moved higher due to LNG tanker rerouting around the blockage.

Crypto traders: Bitcoin at roughly $62,000 is now testing price levels from before the US-Iran conflict began. The $60,000 zone is cited by multiple analysts as the next key structural support. ETF outflows remain the dominant pressure point - a dynamic we covered in depth when Bitcoin first dropped below $66,000 on Tuesday. Ethereum has held slightly better on a percentage basis but follows the same macro dynamic. A sustained reversal in institutional ETF flows is what it would take to change the near-term trajectory.

Potential Positives vs Negatives

Positives:

  • Oil retreating from $97 toward $92 on Thursday suggests some short-term geopolitical risk premium is coming out. Any credible diplomatic signal from Iran peace talks could extend that move.
  • Broadcom's record AI chip revenue ($10.8 billion, +143%) confirms the hardware demand cycle is intact. The sell-off may represent a guidance recalibration, not a structural break in AI infrastructure investment.
  • The Dow's 841-point gain shows institutional capital rotating within equities rather than exiting the asset class. Consumer and defensive sectors are absorbing reallocation flows.
  • Friday's nonfarm payrolls report (8:30 a.m. ET) could reset rate expectations quickly if the number comes in below the 170,000 to 210,000 consensus range.

Negatives:

  • The Strait of Hormuz remains restricted to Western-allied shipping. Until that changes, oil prices stay high and inflation expectations remain anchored at a level that keeps the Fed hawkish.
  • Broadcom's software miss raises questions about AI monetization outside of pure chip demand. If software revenue from AI workloads disappoints more broadly across the sector, the earnings rationale for AI-driven tech premiums weakens.
  • Bitcoin ETF outflows are a structural headwind. Citi's analysis (via CNBC) links roughly 45% of weekly BTC return variation to ETF flows. The near-term path of least resistance stays lower while institutional demand is absent.
  • High-conviction BTC holders turning to sellers at current levels is a different signal than ordinary retail volatility. It raises the risk that $60,000 support gets tested with meaningful volume.

What Could Happen From Here (24-72 Hours)

Base case: Oil holds the $90 to $97 range, ceasefire talks continue without fresh major escalation, and the Nasdaq gradually stabilizes as Broadcom's loss gets absorbed by the rest of the sector. Bitcoin holds above $60,000. The S&P 500 trades between Wednesday's close and its recent all-time high. Confirmed if: No new significant US-Iran strike exchange; no additional major tech earnings disappointments; Friday payrolls in the 170,000 to 210,000 consensus range.

Upside case: Credible diplomatic progress on the Strait of Hormuz - even preliminary language on a partial shipping agreement - would sharply reduce oil's geopolitical premium and trigger a broader risk-asset rally. If Friday's jobs report also comes in below expectations, rate hike pricing falls and yields retreat, lifting tech valuations and crypto. Confirmed if: Credible diplomatic news from Iran peace talks AND nonfarm payrolls below 150,000.

Downside case: A new round of significant US-Iran strikes, escalation involving Gulf state allies (UAE, Saudi Arabia, or Qatar), or any attempt to further restrict oil shipping at Hormuz would push Brent toward $100 to $105 and trigger fresh risk-off across equities and crypto. BTC's $60,000 level breaks, potentially accelerating liquidations. Confirmed if: CENTCOM or Iran state media report new significant strikes; EIA inventories deteriorate further; BTC closes below $60,000 on volume.

What to Watch Next (Next 24 Hours)

  • Friday nonfarm payrolls (8:30 a.m. ET): The week's most important scheduled data release. A strong number above 220,000 locks in the hawkish Fed narrative; a weak number below 150,000 could meaningfully reduce rate hike pricing and provide relief across rates-sensitive assets.
  • US-Iran diplomatic signals: Any credible statement from the US State Department or Iranian foreign ministry on Strait of Hormuz conditions or ceasefire terms will move oil prices within minutes of publication.
  • Broadcom (AVGO) stabilization level: Whether AVGO can hold near its 200-day moving average through Thursday and Friday will set the tone for the broader semiconductor sector heading into next week.
  • Bitcoin $60,000 level: The key technical and psychological support. A close below it on volume would likely trigger additional forced selling and could pull Ethereum down toward $1,600.
  • CME FedWatch rate hike pricing: If June or July FOMC hike odds rise above 50%, yields will push higher and rates-sensitive assets face renewed headwinds across tech and crypto.

FAQ

Why did the Dow rise sharply while the Nasdaq fell on the same day?

The two indices have very different sector compositions. The Dow Jones Industrial Average skews toward financials, industrials, consumer stocks, and energy. The Nasdaq Composite is heavily weighted toward technology and semiconductors. On Thursday, oil eased and consumer stocks rallied, benefiting the Dow, while Broadcom's 14% plunge dragged the semiconductor-heavy Nasdaq lower. This kind of divergence is called a sector rotation - capital moving from one part of the market to another rather than leaving equities as a whole.

How does a Strait of Hormuz restriction affect oil prices over time?

The Strait of Hormuz is the world's most critical oil chokepoint. It carried roughly one-fifth of global oil demand before the current conflict restricted Western-allied shipping. Buyers cut off from normal supply are rerouting through longer, more expensive paths, reducing effective available supply and supporting prices. Analysts from multiple institutions have noted that even a partial reopening agreement could produce a swift reduction in oil prices. Conversely, any further restrictions would likely push Brent crude toward $100 or above.

Sources

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