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Chip Rally Leaves Stocks Behind: What Investors Missed
24 Oct
Summary
- Broadcom's revenue surged 86% year over year in fiscal Q3 2026.
- Adobe's stock remains 63% below its November 2021 record.
- Both stocks trade cheaper than the S&P 500 on expected earnings.
The technology sector has experienced a bifurcated year, with the VanEck Semiconductor ETF surging 52% in 2026, while stocks like Broadcom and Adobe have lagged significantly. Broadcom's shares are down approximately 3% year-to-date, trading about 31% below their June 2 high. Adobe's stock has fallen even more, down around 27% for the year, despite a 33% rise from its June 25 low.
Broadcom's business, however, has shown accelerating momentum. Its fiscal third-quarter revenue climbed 86% year-over-year to $29.6 billion, with management forecasting 93% growth for the fiscal fourth quarter. Profits and free cash flow also saw substantial increases. The primary concern for Broadcom is its heavy reliance on a few large customers, who accounted for 55% of Q3 revenue.
Adobe, while facing market pessimism regarding AI's impact, posted record revenue of $6.76 billion in its fiscal third quarter, a 13% year-over-year increase. The company also raised its full-year earnings per share targets for the second consecutive quarter. Despite potential slowing growth, Adobe's stock trades at an attractive valuation of approximately 10.5 times expected fiscal year earnings.
Both Broadcom and Adobe are trading at lower price-to-earnings multiples than the S&P 500, which currently stands at roughly 19 times earnings. This suggests that current stock prices may not fully reflect the companies' underlying business performance and future prospects, despite distinct risks for each firm.
