Broadcom Falls Despite AI Growth, Google Escapes a Breakup

**Zaid Admani** (0:00)
Public.com presents The Rundown, your daily market update in 10 minutes. My name is Zaid Admani, and today is Thursday, September 3rd. In today's episode, we'll recap earnings from Broadcom and tell you why the stock is under pressure despite a monster quarter. We'll also break down Google's latest victory in court against the DOJ. Then stick around to the end of the show to find out why Microsoft is completely changing the way it reports its financial results, all because of AI. We got a great show for you today.
Let's go.
Stocks broke the three day losing streak yesterday with the S&P 500 and NASDAQ, both gaining about half a percent. And honestly, the biggest positive news yesterday might be the fact that bond yields didn't move higher. The 10 year treasury yield finished about 4.79%, which snapped a five day streak of rising yields. And that gave stocks a little bit of breathing room. Now oil prices are still climbing though, because of the renewed fighting between the US and Iran. Brent crude is trading around $96 a barrel this morning. And that's keeping inflation fears alive, and it could force the Fed to hike rates at the Fed meeting in a couple of weeks. So now all eyes will be on tomorrow's jobs report for the month of August. And the estimates for this report are all over the place. Some forecasts are expecting as much as 121,000 jobs added in the month of August, while other economists think the economy might have lost 25,000 jobs last month. And this jobs report could play a factor on what the Fed decides to do with interest rates. If the labor market shows signs of weakness, the Fed may have to hold off on hiking rates at the September meeting. So I think tomorrow's jobs report could be one of those situations where bad economic news is actually good news for the stock market. We'll break down that jobs report on tomorrow's show, so definitely get subscribed to the podcast if you haven't already, and tune in every day to stay in the loop.
Let's run through some headlines, starting with Broadcom. Broadcom reported earnings last night, and man, the numbers were absolutely insane, but Wall Street still wasn't satisfied. Broadcom has been one of the biggest winners of AI. They helped design custom AI chips for companies like Google, Meta and OpenAI, and they're crushing it right now. Revenues in Q2 were up 86% to 29.6 billion dollars, and AI chip revenue was up 221% year over year to 16.7 billion dollars. On top of that, profits more than tripled from last year. So all those metrics that I just mentioned beat Wall Street estimates, and management expects growth to accelerate even more this quarter. CEO Hock Tan was giving some wild long-term guidance on the earnings call. He said that Broadcom now expects AI chip revenue to reach 115 billion dollars next year, which is roughly double this year's revenue. And the company thinks that revenue could potentially double again to 230 billion dollars in 2028 Management said that demand is so high that Broadcom can't keep up with supply. So all in all, this seems to be a blowout quarter, and you would think with numbers like that, the stock would be ripping kind of like how Nvidia did after their earnings. But that doesn't seem to be the case here. Broadcom stock is down around 3% this morning at the time of this recording. There were a couple slight misses on this report. The near term guidance was a little underwhelming. On top of that, operating margin outlook also came in slightly light. And the thing is, Broadcom stock has been beaten up lately. Shares are down roughly 26% from their all time highs set back in June. And this report wasn't strong enough for investors to jump back in. I should also mention Broadcom is getting some criticism over circular financing concerns. For example, Broadcom is helping Anthropic finance a data center and also the development of Anthropic's custom AI chips. But then again, NVIDIA is also doing that and more, and the market doesn't seem to care about them doing it. This situation kind of reminds me of the HR meme where NVIDIA is doing circular financing, but the market doesn't seem to care. But when Broadcom does it, the market doesn't seem to love it. Overall, I think Broadcom is in a strong spot here. The growth is accelerating. They can't keep up with demand, and they're working with multiple AI companies to build custom chips for them. So Broadcom could be a balanced back candidate in the back half of the year.
Let's shift gears and talk about Google. A federal judge handed Google a massive legal victory yesterday, ruling that the tech giant does not have to break up its advertising tech business. So a quick explainer here, Google's ad business isn't just selling ads on Google search and YouTube. Google also has a ad tech that helps websites sell ad space. Basically, their tech lets advertisers bid on advertising space on websites, and then the websites pay Google a 20% cut on every sale. But back in 2025, a judge ruled that that was an illegal monopoly, and the DOJ wanted Google to sell the ad exchange business. Well, the judge is not forcing that, but Google will have to make some changes to their product to make the market more competitive, but it doesn't have to sell this business. Honestly though, this ad exchange business is a pretty small part of Google now. It brought in about $30 billion in revenue last year, which sounds like a lot, but it's only 8% of Alphabet's revenue, and accounts for less than 1% of the company's profits. This business has also been shrinking for 16 straight quarters. So I don't think the market really cares about this business, and that's why the stock barely moved on the snooze yesterday. For Google, it's all about AI at this point, and they seem to be falling behind when it comes to their AI models compared to OpenAI and Anthropic. Now Google did just release a new model called Gemini 3.8 Flash. It's gotten OK reviews, but I feel like Google needs to make a big splash soon, either with a state-of-the-art model or a new AI product to capture some of the height they had late last year. You know, this year Google stock is only up 5% on the year. Now the company did just announce a Gemini partnership with MrBeast, so I don't know, maybe that's enough to turn things around.