Why Meta Platforms, Taiwan Semiconductor, Advanced Micro Devices, and Other Artificial Intelligence (AI) Stocks Tumbled on Monday

One of the byproducts of the accelerating adoption of artificial intelligence (AI) has been the investor practice — for better or for worse — of viewing AI stocks collectively. In many instances, developments concerning one company in the space can have a ripple effect, bringing a broad cross-section of stocks in the space up or down with them. That appears to be the case Monday morning, as two developments seem to be having on outsize impact on AI companies.

With that as a backdrop, foundry Taiwan Semiconductor Manufacturing (NYSE: TSM) tumbled 4.1%, social media company Meta Platforms (NASDAQ: META) slumped 4%, chipmaker Advanced Micro Devices (NASDAQ: AMD) dropped 3.8%, computer memory specialist Micron Technology (NASDAQ: MU) declined 3.1%, and semiconductor specialist Broadcom (NASDAQ: AVGO) fell 1.9%, as of 1:32 p.m. ET on Monday.

A check of all the usual suspects — regulatory filings, financial reports, and changes to analysts’ price targets — turned up one piece of negative company-specific news — while surprisingly, there were a number of positive catalysts (more on that in a bit). Furthermore, troubling news about a high-profile company in the space seemed to put AI investors in a dour mood.

A one-two punch

Broadcom released the results of its fiscal 2024 first quarter (ended Feb. 4) on Friday, and investors weren’t particularly impressed. The semiconductor specialist generated revenue of $11.96 billion, an increase of 34% year over year, resulting in adjusted earnings per share (EPS) of $10.99, an increase of 6%.

While both metrics exceeded Wall Street’s expectations, management’s forecast seemed to catch investors off guard. Broadcom reiterated its outlook for the 2024 fiscal year, guiding for revenue of $50 billion. Investors were hoping the company would boost its guidance after exceeding expectations for the quarter. The news weighed on many AI and chip stocks on Friday.

Investors seemed to be waiting for the other shoe…