AI Chip Sell-Off Spreads to NVIDIA and AVGO as BofA Calls the Pressure Irrational

U.S. software shares plunged in early February, spreading selling pressure to the AI chip sector on Wednesday, February 4, 2026, dragging NVIDIA (NVDA-US), Broadcom (AVGO-US), and others lower. NVIDIA and AVGO each fell over 3% on Wednesday. Memory and storage shares were hit harder: Micron (MU-US) down 9.55%, and SanDisk (SNDK-US) down 15.95%. These declines followed strong AI-driven earnings gains and reflect heightened risk sentiment. BofA analyst Vivek Arya argues the indiscriminate sell-off is logically contradictory: investors see waning AI ROI and growth sustainability, yet software shares suggest AI will broaden adoption and boost productivity, threatening legacy software. He draws parallels to the overblown sell-off on China’s DeepSeek in early 2025, which overreacted to potential commoditization of inference models, but did not signal reduced AI investment. Arya notes cloud capital expenditures are expected to grow 69% in 2026, far exceeding prior 20%–30% forecasts. While AI’s productivity impact may take years to materialize, he expects sustained investment to drive model upgrades and maintain user demand. He seesongyang nations driving adoption and maintaining control over AI initiatives. Valuations in the chip sector currently reflect caution on spending declines and earnings downgrades, but Arya believes these scenarios may not materialize.