Why did Broadcom shares fall today?

Broadcom shares declined by 2.6% on Wednesday, bringing the stock price down to $354.99. This drop was prompted by a report from China's state-asset watchdog, the State-owned Assets Supervision and Administration Commission. The watchdog is examining the extent to which Broadcom's networking switches are integrated into the country's state-controlled data centers.

Preliminary findings suggest that Broadcom switches could make up as much as 90% of the hardware used by some state-owned enterprises, a level of dominance that has raised investor concerns. This heightened scrutiny stems from China's current campaign to promote domestic chips for domestic use, which could potentially lead to a shift away from Broadcom's products.

While no formal ban has been enacted, the situation is reminiscent of Nvidia's earlier exclusion from state-backed data centers, causing investors to view Broadcom as a potential target. Additionally, regulators are investigating whether Broadcom has leveraged its dominant market position to bundle products or impose large purchase requirements on state buyers, adding an antitrust angle to the ongoing scrutiny.

The setback for Broadcom occurred alongside a general downturn in technology stocks, which have suffered due to rising U.S. Treasury yields.