Semiconductor stalwart Broadcom (NASDAQ:AVGO) finally started to see some weakness hit its otherwise incredible market performance. Following news that CEO Hock Tan offloaded 7,502 shares of AVGO stock, the high-flying equity dipped conspicuously. The red ink comes amid rising concerns that the broader artificial intelligence (AI) ecosystem could be overstretched.
According to a report by Investing, Tan — who also serves as Broadcom’s president — sold the aforementioned stake on July 11. The sale amount came out to just under $12.8 million, with shares selling at a price of $1,705.95 each. Though the underlying disclosure filing did not reveal the purpose of the security sale, the “shares were contributed into two exchange funds, as indicated in the footnotes of the report,” per Investing.
To be fair, Tan still holds a significant amount of Broadcom stock. The head executive holds 138,191 shares indirectly through a trust. In addition, he still holds 10,753 shares directly.
It’s important to note that insider sells are difficult to decipher. While the natural instinct is to assume a lack of confidence in the business, the reality is that stakeholders sell for a variety of reasons, some of them mundane, such as for tax-related purposes. Therefore, it’s not necessarily prudent to overreact to such news.
AVGO Stock Sale a Distracting Element Amid AI Hype Concerns
Nevertheless, it would be erroneous to suggest that the insider sale doesn’t at least underscore some concern for AVGO stock. For one thing, data from Gurufocus shows that insiders have stopped acquiring Broadcom shares over the last several months. In fact, its data reveals that within the past six months, all insider transactions have been sells.
Another factor that investors are likely considering is the broader sentiment for AI-related enterprises. Semiconductor powerhouse Nvidia (NASDAQ:NVDA) has seen its shares decline by about 2% Tuesday. In the trailing month, NVDA slipped approximately 4%, a far cry from its prior blistering run.
As for Broadcom stock, it’s down 8% from its closing high of $182.31 on June 17. Much of the problem centers on the forward viability of AI investments. Recently, Goldman Sachs warned that the end-productivity results of digital intelligence may not justify the money poured into the sector.
For now, analysts remain overwhelmingly bullish on AVGO stock, rating it a consensus strong buy. Only one dissenting voice views shares as a hold. Still, the latest insider sell may add a wrinkle to how investors perceive Broadcom.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor held a LONG position in NVDA.
