It’s becoming increasingly challenging for artificial intelligence (AI) stocks to impress the market. Case in point: on May 20, Nvidia (NVDA +3.39%) reported its financial results for the first quarter of fiscal year 2027, which ended on April 26. Although its revenue and earnings came in ahead of analyst estimates, the stock still moved lower. Two other AI-focused companies that suffered the same fate are CoreWeave (CRWV +6.13%) and Broadcom (AVGO +3.01%). Shares of both tech leaders fell significantly post-earnings, but should investors rush to buy the dip? Let’s find out.
Image source: The Motley Fool.
1. CoreWeave
CoreWeave’s first-quarter results looked strong, so long as we stop at the top-line. The company’s revenue grew by 111.6% year over year to $2.1 billion. However, CoreWeave’s net losses widened significantly to $740 million, worse than the $315 million net loss reported in the year-ago period. What’s more, the company’s guidance did not meet Wall Street’s expectations, leading to a sharp post-earnings dip. The bulls will point out that CoreWeave’s deepening net losses are necessary to support its incredible growth potential.
CoreWeave helps other corporations train and run AI models through a network of data centers. It currently operates 49 of them. Equipping and maintaining these data centers isn’t cheap, but the investments might pay for themselves several times over in the next five years and beyond. CoreWeave ended the first quarter with a backlog of nearly $100 billion, up 49% from the fourth quarter.
Today’s Change
(6.13%) $6.16
Current Price
$106.71
Key Data Points
Market Cap
$58B
Day’s Range
$103.80 – $108.80
52wk Range
$63.80 – $187.00
Volume
690.6K
Avg Vol
29.1M
Gross Margin
34.82%
Further, AI infrastructure spending is projected to continue growing. According to Nvidia, it could reach $3 trillion to $4 trillion by the end of the decade. The hyperscalers (large cloud computing providers) will be responsible for much of that. This is good news for CoreWeave, whose biggest client is Microsoft (MSFT +2.22%). However, the company also faces significant risk. The first is valuation. CoreWeave isn’t profitable yet, so it doesn’t have a price-to-earnings (P/E) ratio.
But the company’s price-to-sales ratio is 8.2, well above the “2 and below” range where stocks are typically considered attractively valued. While CoreWeave is worth a premium given its rapid growth and prospects in the AI industry, some may argue it is currently too expensive. Second, CoreWeave’s business is highly concentrated, with Microsoft accounting for 67% of its revenue in the fiscal year 2025. If Microsoft slows spending, it could be catastrophic to CoreWeave’s bottom line.
So, what’s the verdict? Despite CoreWeave’s upside potential, there is significant risk. The company could still be a market-beater over the next five years if AI spending maintains its northbound path, but investors should proceed with caution, brace for significant volatility, and initiate only a small position in the stock.
2. Broadcom
Broadcom’s financial results — for the second quarter of its fiscal year 2026, ending on May 3 — also looked strong. The company’s revenue of $22.2 billion soared 48% year over year. That included $10.8 billion in revenue from its AI semiconductor business, up an impressive 143% compared to the year-ago period. The company’s adjusted earnings per share jumped 54% to $2.44, while free cash flow rose 60% to $10.3 billion.
However, Broadcom’s guidance for the next quarter, particularly for its AI chip business, fell short of Wall Street’s expectations, sending the stock price lower. This seems surprising since Broadcom expects its semiconductor revenue from AI to soar by more than 200% year over year to $16 billion in its upcoming Q3 2026. This highlights, once again, that the market has incredibly high expectations.
Today’s Change
(3.01%) $11.50
Current Price
$393.57
Key Data Points
Market Cap
$1.9T
Day’s Range
$388.60 – $396.09
52wk Range
$244.17 – $495.00
Volume
5.1K
Avg Vol
25.6M
Gross Margin
65.66%
Dividend Yield
0.63%
Could Broadcom bounce back? There are good reasons to think so. The company is a leading provider of custom AI chips. These aren’t as versatile as Nvidia’s market-leading GPUs (Graphics Processing Units), but Broadcom’s chips are more cost-effective and can offer comparable — and perhaps even better — performance for certain tasks. Broadcom’s customers include big names such as Alphabet (GOOG +2.38%) (GOOGL +2.56%). Demand for custom AI chips could increase as corporations seek to reduce their reliance on Nvidia’s hardware, improve profits and margins, and capitalize on the rapidly growing AI industry.
That puts Broadcom in a strong position. Broadcom does face similar issues to CoreWeave. Broadcom’s forward P/E of 33 looks fairly high. The average for information technology stocks is 22.3. Further, the AI chipmaker’s business is significantly concentrated, with five end customers accounting for roughly 40% of its revenue in its two most recent fiscal years. Still, Broadcom has a mature, profitable business, generates plenty of cash flow, and offers a decent dividend program. And with AI spending still growing, Broadcom could cash in on this over the next five years, making its shares attractive following the post-earnings dip.