Investors often use the term ‘priced for perfection’ to indicate when high expectations are reflected in a share price. In an editor’s note several weeks ago I pondered the investor expectations for the US market and in particular the wider AI narrative.
Chip maker Broadcom is very much caught up in the hype. On 9 June 2025 the shares were trading at $244. By the 2 June 2026 they were trading at $488 after doubling in price in less than a year.
Since reporting results on 3 June the shares have fallen about 20%. This is a significant move for the sixth largest company in the S&P 500 with a market cap of approximately $1.86 trillion after the steep drop in the share price.
The price swing is indicative of an increasingly volatile market and optimistic AI investors who expect news to keep getting better.
Specifically, what spooked investors was Broadcom’s AI revenue guidance for 2027. In March the company issued guidance that AI revenue in 2027 would total $100 billion. Three months later Broadcom maintained their guidance.
It is hard to see this announcement as bad news since Broadcom didn’t reduce guidance. But when it comes to AI the numbers are supposed to keep getting bigger.
Who is investing in AI?
Groucho Marx famously joked that he would never join a club that would have him as a member. I often think of this quote when contemplating the impact of herd mentality in investing.
Who is investing in particular shares and what they want matters. If you understand the motivations of different types of investors their behaviour is less surprising.
There are several reasons Bitcoin is not an investment that I would consider. I’m an income investor and since Bitcoin doesn’t provide income it is a non-starter. But I’ve also always been concerned about who was investing in Bitcoin and how they would likely behave.
Bitcoin advocates have argued about the importance of the underlying technology and the benefits of the decentralised nature of Bitcoin. I accept these arguments and ultimately what gives anything value is simply the acceptance among people that it is valuable.
But I don’t think any specific attributes of Bitcoin are motivating most people buying and selling Bitcoin. They are speculating that Bitcoin will rise in value quickly and significantly.
When the only reason you buy something is because you think it will go up a significant amount quickly you don’t tend to have much patience. This can lead to high levels of volatility.
Source: Google Finance
Bitcoin’s all-time high was $126k US in October of 2025. It is currently trading at around $61k. One of the reasons cited for this decline according to Bitwise CIO Matt Hougan is the former speculators in Bitcoin have moved onto AI. Hougan says the attitude is “Who needs crypto when the Nasdaq-100 is up 43% year-over-year?”
None of this suggests that the companies at the heart of the AI narrative will not make great long-term investments. But many investors may not be focused on the long-term. There is likely going to be a good deal of volatility along the way if guidance doesn’t keep going up in a straight line.
Final thoughts
Volatility is both a risk and an opportunity. The more volatile an investment the higher the behavioural risk of investors doing something stupid to hurt their returns.
But with those big price swings comes opportunity for investors who can focus on the underlying business and ignore the share price. Broadcom just might be an example as the Morningstar analyst covering the company thinks the $100 billion of guidance is conservative and expects $200 billion in AI revenue in 2027.
A little mental preparation for volatility and a focus on the long-term pays off in every market environment. I have a feeling the current environment won’t be an exception.
Mark Lamonica
Also in this week's edition...
Meg Heffron walks through whether CGT changes shift Division 296 tax decisions.
The budget has introduced a great deal of uncertainty surrounding testamentary trusts. Dr Sylvia Villios examines the implications for estate planning.
Five tax cuts have been handed down in the Federal budget. Tony Dillion looks at how the cuts stack up against bracket creep.
Quality strategies shine globally, but Australia's concentrated market tells a different story. VanEck shares the limits of a quality investing approach in Australia.
Fresh questions are being raised as private markets expand. The Neuberger Private Markets team explores balancing opportunity and complexity.
As EOFY approaches, Chris Cuffe discusses why strong returns matter as much as generosity.
Simonelle Mody talks about why asset allocation is the most important investment decision you'll ever make.
This week's white paper from Yarra's Tim Toohey, explains why the RBA is unlikely to raise rates further during the current cycle.
Curated by Simonelle Mody and Leisa Bell
Latest updates
PDF version of Firstlinks Newsletter
Monthly Gold ETF Flows from World Gold Council
Monthly Bond and Hybrid updates from ASX
Listed Investment Company (LIC) Indicative NTA Report from Bell Potter
ASX Listed Bond and Hybrid rate sheet from NAB/nabtrade
Plus updates and announcements on the Sponsor Noticeboard on our website