As artificial intelligence (AI) chipmaker Broadcom (AVGO) prepares to report its quarterly results, tech stocks are coming under pressure as investors navigate an increasingly hostile macroeconomic and geopolitical backdrop. A Federal Reserve pause or rate cut is now facing a much higher hurdle, as a fresh geopolitical flare-up has sent crude prices soaring and reignited concerns over inflation.
Renewed tensions in the Middle East have also pushed global bond yields sharply higher. The U.S. 10-year Treasury yield briefly touched 4.80% on Tuesday before climbing as high as 4.820% in overnight hours on Wednesday. It has since pulled back, but remains elevated at around 4.788%.
Why Elevated Bond Yields Are Bad for Tech Stocks
Higher bond yields hit equities through three main channels. They make bonds relatively more attractive, raise the discount rate applied to future earnings, and can tighten financial conditions enough to weigh on the earnings outlook. The discount-rate channel is particularly important for growth stocks because a greater portion of their valuations depends on cash flows expected further into the future.
The backdrop is becoming even more challenging as the Federal Reserve under Chair Kevin Warsh has taken a more hawkish stance, with inflation remaining a key policy concern. Warsh reinforced that message in his Jackson Hole speech last week, prompting markets to sharply reprice the outlook for interest rates. The probability of a 25-basis-point rate hike at the September meeting, which was below 40% ahead of the event, has now climbed to roughly 66%.
For the Nasdaq 100 (NDX), that combination creates a difficult setup: higher oil prices threaten to revive inflation, higher Treasury yields increase the discount rate applied to future earnings, and a more hawkish Fed reduces the prospect of near-term monetary relief. That leaves Broadcom's results and, more importantly, its forward guidance with the potential to become a key catalyst for NQ's next move.
Broadcom Has to Contend With Elevated Expectations
It isn’t easy being an AI-exposed stock in today’s market, with expectations set exceptionally high and even a modest beat or in-line results often failing to satisfy investors. Broadcom’s fiscal 2026 second-quarter report in early June offered a clear example. Despite beating estimates on both the top and bottom lines, generating a record $10.3 billion in free cash flow and projecting a doubling of AI chip revenue in the second half of the fiscal year, Broadcom shares fell more than 12% in the session following the June 3 earnings report.
The bar is arguably even higher heading into the fiscal third-quarter results.
Earnings Expectations
| Guidance (Q3'26) | Consensus (Q3'26) | Q3'25 | Y-o-Y Growth (Estimated) | Q2'26 | Q-o-Q Growth (Estimated) | |
|---|---|---|---|---|---|---|
| Revenue | $29.4B | $29.43B | $15.95B | +84.5% | $22.19B | +32.5% |
| EPS | — | $3.24 | $1.69 | +91.7% | $2.44 | +32.8% |
That would mark a significant acceleration from the fiscal second quarter, when revenue and adjusted EPS grew 48% and 54% YoY, respectively. In other words, Broadcom isn’t simply being asked to beat estimates; It needs to deliver another step-up in growth and provide guidance strong enough to justify the lofty expectations already embedded in the stock.
Morgan Stanley Sees Further AI Upside
Morgan Stanley analyst Joseph Moore expects another strong quarter from Broadcom, with momentum across both custom ASICs and AI networking. Moore estimates AI revenue of $16 billion for the quarter, representing a 48% sequential increase.
Looking ahead to the October quarter, Morgan Stanley expects AI revenue to rise another 32% sequentially to $21.2 billion, comprising approximately $14.9 billion in custom ASIC revenue and $6.2 billion in AI networking. The firm sees room for upside to those estimates, citing continued strength in TPU demand and the benefit to networking from the broader buildout of AI infrastructure.
Moore is even more constructive on Broadcom’s longer-term opportunity. The firm sees potential upside to its approximately $120 billion AI revenue estimate for 2027, suggesting that the current AI infrastructure cycle could remain a powerful growth driver well beyond the near-term earnings print.
The Risk Is Expectations, Not Fundamentals
That optimism comes with an important caveat. According to Moore, the biggest risk heading into the earnings report is not Broadcom’s underlying business, but the exceptionally high expectations already reflected in the stock.
“The underlying business can continue to perform exceptionally well without necessarily exceeding the most aggressive expectations,” Moore said, adding that investors should also be cautious about reading too much into recent supply-chain noise.
That distinction could be crucial for the market reaction. Broadcom may deliver another strong quarter, but with expectations already elevated, the stock—and potentially the broader Nasdaq 100—could require not just strong results, but a meaningful upside surprise and bullish forward guidance to sustain the rally.
Broadcom Earnings Scenario Analysis
Broadcom’s earnings reaction could ultimately come down to the gap between what the company delivers and what investors already expect. With AI revenue growth accelerating sharply and the broaderNasdaq 100 under pressure from higher yields and a less accommodative Fed, even a strong report may not be enough if the outlook fails to clear the market’s increasingly high bar.
Potential Ramifications for NQ Futures
| Scenario | AVGO earnings | Guidance/AI Commentary | Likely stock reaction | Potential NQ reaction |
|---|---|---|---|---|
| Bullish | Revenue and EPS beat estimates decisively | Strong AI revenue outlook; custom ASIC and networking demand remain robust; guidance raised or upside signaled | Sharp upside | NQ could rebound as AI optimism offsets yield pressure |
| Base-case | Modest beat or results broadly in line | Guidance maintained; management remains constructive but does not materially raise expectations | Choppy/limited reaction | NQ likely remains range-bound, with yields and macro factors retaining control |
| Bearish | Beat is small or results miss expectations | AI growth outlook disappoints, guidance is cautious, or supply constraints emerge | Sharp sell-off | NQ faces renewed downside pressure as AI leadership weakens |
| “Good but Not Good Enough” | Strong beat across revenue, EPS and AI revenue | Outlook is solid but fails to exceed elevated buy-side expectations | Initial rally could fade or reverse | NQ vulnerable to a sell-the-news reaction, particularly if Treasury yields remain elevated |
The Bull Case: AI Demand Clears the Bar
The cleanest bullish outcome would be a meaningful beat accompanied by evidence that AI infrastructure demand remains stronger than expected. A particularly important signal would be upside to custom ASIC revenue and AI networking, as those businesses provide investors with visibility into hyperscaler spending and the next phase of the AI buildout.
If Broadcom also raises its outlook or signals that the current momentum can extend into 2027, the market could look beyond elevated Treasury yields and focus on accelerating earnings growth. Such a result would strengthen the case for Broadcom as one of the key beneficiaries of the AI infrastructure cycle and could provide a catalyst for NQ to recover.
The Base Case: Strong Results, Limited Upside
The more neutral outcome is a solid quarter that broadly meets or modestly exceeds expectations, while management maintains a constructive outlook without materially raising guidance. Fundamentally, that would still represent an exceptionally strong performance, but it may not be enough to push the stock materially higher.
This is where the June reaction becomes particularly relevant. Broadcom already demonstrated that strong results can fail to translate into gains when expectations are stretched. If the company delivers what investors already anticipate, the market could quickly shift its attention back to Treasury yields, oil prices and Fed policy. In that scenario, NQ could remain volatile and directionless rather than receive a sustained earnings-driven boost.
The Bear Case: Expectations Finally Break
The downside scenario would involve any indication that AI growth is beginning to moderate faster than expected. A revenue or EPS miss would obviously be negative, but an apparently strong quarter could also trigger a selloff if AI revenue, custom ASIC demand or forward guidance falls short of the most aggressive expectations.
A cautious outlook for the October quarter would be particularly damaging because investors are already looking for another substantial sequential increase in AI revenue. Any sign of weaker hyperscaler demand, supply constraints or slower networking growth could therefore prompt investors to question whether the AI spending cycle can sustain its current pace.
For NQ, that would create a potentially potent combination: a selloff in a major AI infrastructure name at the same time that elevated Treasury yields are already pressuring technology valuations. The result could be a broader de-risking across AI and high-duration growth stocks.
The Key Risk: A “Good but Not Good Enough” Report
Perhaps the most important scenario is one in which Broadcom beats expectations but the stock still falls. Given the experience of the June earnings report, investors should not assume that a headline beat automatically translates into an upside reaction.
The critical question will be whether Broadcom raises the bar for future growth or merely meets the bar that investors have already set. With consensus already calling for roughly 85% year-over-year revenue growth and 92% EPS growth, the company needs to provide evidence that AI demand can continue exceeding increasingly ambitious expectations.
That makes forward guidance and management commentary arguably more important than the headline quarterly numbers. A strong report that fails to lift expectations could trigger a sell-the-news reaction, while a genuine upside surprise could give NQ the catalyst it needs to overcome the current headwinds from oil, Treasury yields and Fed policy.
NQ Positioning Signals a Sharp Divergence
NQ is trading around 29,149, while the positioning data shows a pronounced split between profitable and unprofitable traders. Profitable traders are only 38.8% long, meaning roughly 63% are short, compared with 59.1% long among unprofitable traders. according to MarketFramework's Positioning Edge tool. That creates an “extreme bearish divergence” signal: the traders currently performing better are positioned much more defensively than those struggling.
What It Means for the Broadcom Setup
This makes tonight's Broadcom earnings even more interesting. If Broadcom delivers a strong upside surprise and NQ pushes above 29,190, the heavily short profitable cohort could become a source of buying pressure through short covering. A sustained move above that level would therefore have greater significance than the positioning alone suggests.
Conversely, a weak Broadcom reaction combined with a break below roughly 29,130 would validate the bearish positioning, potentially allowing the losing longs to capitulate and adding further downside momentum.
