Trump’s trade war strikes again: Broadcom plummets after cutting its yearly sales forecast, dragging the entire chipmaker industry lower (AVGO)

AP Images / Evan Vucci

Broadcom shares sunk on Friday morning as the chipmaker missed revenue estimates and lowered its sales outlook for the year.
The broader semiconductor industry has been caught in the crosshairs of the trade war between the US and China. Many traded sharply lower on the report.
Broadcom shares were down as much as 10% before the opening bell on Friday.
Watch Broadcom trade live.

Broadcom shares dropped before the opening bell on Friday after the semiconductor giant lowered its revenue outlook for the year due to concerns over slowing demand from the trade war.

"We currently see a broad-based slowdown in the demand environment, which we believe is driven by continued geopolitical uncertainties, as well as the effects of exports restrictions on one of our largest customers," Hock Tan, Broadcom’s president and chief executive officer said in a press release.

He continued: "As a result, our customers are actively reducing their inventory levels, and we are taking a conservative stance for the rest of the year."

Despite revenue rising 10% from the same period the year before to $5.51 billion, the figure fell short of analyst expectations of $5.67 billion. Broadcom also reported earnings per share of $5.20, outperforming analyst estimates of $5.15.

Further, Broadcom lowered its 2019 revenue outlook from $24.5 billion to $22.5 billion. The San Jose-based company expects $17.5 billion of the $22.5 billion to come from semiconductor solutions and the remaining $5 billion to come from infrastructure software. The company also announced a quarterly divided of $2.65 per share.

Huawei, one of Broadcom’s largest customers, was blacklisted by the US in May over national security concerns, preventing the company from working with US businesses such as Broadcom.

Shares of other major chipmakers starting sliding early Friday as well. Qualcomm, which almost merged with Broadcom last year before the deal was shot down by President Trump on national securit concerns, is down more than 2% in pre-market trading.

Here are some other chipmakers feeling the impact:

The iShares PHLX Semiconductor ETF, which tracks major chipmakers like Qualcomm, Broadcom, Nvidia and Intel, was also down close to 3% before the market opened on Friday.

"The current cyclical downturn has been different from most other semi downturns due to the impact of trade tensions," Raymond James analysts led by Chris Caso said in a research note on Wednesday.

Broadcom shares are up 5.59% this year.

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