Broadcom tumbles 10% after earnings as AI trade sells off

Broadcom’s Quarterly results and guidance exceeded Wall Street forecasts. It didn’t matter.

Shares of the chip maker fell 11% on Friday, its worst day since January, as investors headed for exits from the AI ​​trade. Seer It fell 4% on the day after dropping 10% following its earnings report.

AI has been the engine of the stock market and the economy in general this year, so any negative sentiment could potentially have far-reaching consequences. On Friday, the Nasdaq fell about 1.4% and the S&P 500 fell about 1%.

The companies hardest hit are those most closely tied to AI infrastructure, which is booming as hyperscalers build data centers to meet what they describe as insatiable demand for compute-intensive AI services. Broadcom makes custom chips for many of the biggest tech companies and has seen its market value nearly double in the past two years before rebounding in 2025.

“This stock is up 75-80% year to date. You’re seeing a little bit of a pullback,” Mizuho analyst Vijay Rakesh told CNBC’s “Squawk on the Street” on Friday. “We will be buyers in this pullback.”

Mizuho raised its price target on the stock to $450 from $435. It was trading below $364 as of Friday afternoon.

“This is still where the growth is,” Rakesh said. “They are still the biggest supplier Google across all hardware stacks MetaAnthropic and even OpenAI moving forward.”

Broadcom reported 28% revenue growth in the quarter, to a total of $18.02 billion, largely due to a 74% increase in AI chip sales, according to LSEG. This exceeded the average analyst estimate of $17.49 billion, according to LSEG. Adjusted earnings per share of $1.95 beat the average estimate of $1.86.

CEO Hock Tan said Broadcom expects sales of AI chips this quarter to double to $8.2 billion from a year earlier, from both custom AI chips and semiconductors for AI networking.

One concern among investors is that margins will decline, at least in the short term, due to higher upfront costs. CFO Kirsten Spears said in the earnings call that “gross margins will be lower” for some of Broadcom’s AI chip systems because the company will have to purchase more parts to produce server racks.

Broadcom also said it has a $73 billion backlog of AI orders over the next 18 months. Some of that comes from $21 billion in orders from Anthropic, which the company announced Thursday is a major customer.

OpenAI becomes highly coveted client after multibillion-dollar deal Announced in October“We don’t expect much from 26,” Tan dampened hopes for the deal, telling investors late Thursday.

Bernstein analyst Stacy Rasgon said in a note on Friday that “AI concerns” are driving Broadcom’s shares lower.

“Frankly, we’re not sure what else to ask for as the company’s AI story continues to overdeliver while also doing so at an accelerating pace,” Rasgon, who recommends buying the stock and raised his price target, wrote in a note.

Oracle faces more extreme skepticism. The stock is now down more than 40% from the record it reached in September. The company beat earnings but missed revenue in its report on Wednesday, and investors were disappointed they couldn’t get more details on how Oracle will finance its massive development, which has so far required tons of debt.

CoreWeaveThe company, which invests in data centers to offer cloud-based artificial intelligence services, tumbled 9 percent on Friday and has lost more than half its value since its peak in June.

WRISTWATCH: Mizuho raises price target on Broadcom