Broadcom Inc's Broadcom (AVGO) post-earnings sell-off may have disappointed shareholders, but it highlighted a bigger story brewing across the artificial intelligence ecosystem.

The earnings commentary highlighted the growing importance of custom AI chips, or application-specific integrated circuits (ASICs), in the next phase of AI infrastructure spending.

Broadcom's projection that AI semiconductor revenue will cross $100 billion by fiscal 2027 is strengthening the investment case for semiconductor ETFs with significant exposure to the chipmaker, as rising demand for ASICs from hyperscalers brings a new touch to interest around AI infrastructure.

"Despite the miss today, AVGO forecasts semiconductor revenue to grow over 200% year over year. While the name is being punished post-market, it is hard not to see a bullish path forward," said Ryan Lee, Direxion's senior vice president of Product and Strategy.

Shares of Broadcom fell about 15% in premarket trading on Thursday after the semiconductor giant projected third-quarter AI semiconductor revenue of $16 billion, below Wall Street expectations of $17.2 billion. While the company topped earnings estimates and raised overall revenue guidance, investors appeared underwhelmed by management's decision to reiterate, rather than increase, its long-term AI outlook.

Broadcom reported second-quarter revenue of $22.19 billion, slightly ahead of consensus estimates of $22.13 billion, while adjusted earnings per share of $2.44 topped expectations of $2.39. AI semiconductor revenue surged 143% year over year during the quarter. The company expects total third-quarter revenue of $29.4 billion, above analyst forecasts of $28.61 billion.

The ETF Takeaway: AI Spending Is Broadening Beyond Nvidia

For ETF investors, Broadcom's results reinforce a trend that could reshape semiconductor fund performance over the next several years.

While Nvidia Corp (NVDA) remains the dominant beneficiary of the AI boom, hyperscalers including Alphabet Inc (GOOGL), Meta Platforms, Inc (META), Amazon.com, Inc (AMZN) and Microsoft Corp (MSFT) are increasingly investing in custom-designed AI accelerators tailored to their own workloads.

Broadcom has emerged as one of the leading suppliers enabling that transition, designing application-specific integrated circuits, or ASICs, for some of the world's largest cloud and AI companies.

That shift matters because AI infrastructure spending is expected to reach roughly $650 billion this year. As more spending flows toward custom silicon, networking hardware and memory rather than solely GPUs, investors may need to look beyond pure Nvidia exposure when evaluating semiconductor ETFs.

Lee noted, "Hyperscaler capex is here to stay in the near and medium terms, and AVGO is as well-positioned as anyone to capitalize. Today's pullback in the name does not change this fact and could pose an opportunity."

Which ETFs Are Positioned for the ASIC Trade?

Among broad semiconductor ETFs, Broadcom has become one of the largest holdings alongside Nvidia, helping investors gain exposure to the custom-chip theme without owning individual stocks.

Key funds benefiting from the trend include VanEck Semiconductor ETF (SMH), iShares Semiconductor ETF (SOXX), Invesco PHLX Semiconductor ETF (SOXQ), and First Trust Nasdaq Semiconductor ETF (FTXL).

Apart from holding Broadcom, these funds also provide exposure to other players of the ASIC ecosystem, including memory suppliers, foundries and networking companies that play a part in AI data center expansion.

Moreover, Direxion Daily Semiconductor Bull 3X ETF (SOXL) and Direxion Daily Semiconductor Bear 3X Shares (SOXS) can also offer amplified results for tactical traders.

"AVGO is one of the last semiconductor giants to report this quarter, and while the sector has been on fire, today's results could douse cold water on the rally. With sector-wide implications, SOXL and SOXS, offering 3X and minus 3X daily exposure to the ICE Semiconductor Index, are the tactical tools of choice for traders with conviction around semiconductors," Lee said.

Also, traders looking to buy the dip in anticipation of a quick reversal should look to Direxion Daily AVGO Bull 2X ETF (AVL), for 2X daily exposure to the chip giant, Lee suggested.

Beyond GPUs

Broadcom CEO Hock Tan reiterated that AI semiconductor revenue is expected to exceed $100 billion by fiscal 2027, reflecting surging demand for ASICs from hyperscale cloud providers, and underscoring management's confidence in long-term demand despite the near-term market reaction.

For ETF investors, the company's earnings suggest the next chapter of the AI trade may not be about choosing between Nvidia and Broadcom. Instead, it could be about owning the broader semiconductor ecosystem as AI spending evolves from a GPU-centric story into a custom-silicon arms race.