Broadcom delivered exactly what Wall Street typically rewards: strong earnings, robust guidance, and eye-catching growth tied to artificial intelligence. Yet the market response was brutal.
Shares of the chipmaker plunged 11% on Friday, marking their worst single-day drop since January, as investors abruptly pulled back from some of the most crowded names in the AI trade. The selloff spilled across the sector. Oracle fell another 4% a day after tumbling 10% following its own earnings report, while AI-focused infrastructure players such as CoreWeave also came under heavy pressure.
The broader market felt the impact. The Nasdaq slid about 1.4%, while the S&P 500 dropped close to 1%, underscoring how deeply AI-linked stocks have become intertwined with overall market sentiment in 2025.
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At the heart of the move is a growing unease that the AI infrastructure boom, which has powered both corporate profits and stock prices for the past two years, may be entering a more complicated phase. Hyperscalers are still pouring money into data centers and custom chips, but investors are increasingly asking how sustainable the pace of spending is, and at what cost to margins and balance sheets.
Broadcom sits squarely in the middle of that debate. The company has been one of the biggest beneficiaries of AI’s rise, supplying custom chips and networking hardware to some of the world’s largest technology firms. Its market capitalization roughly doubled in each of the past two years before extending gains again in 2025, leaving the stock up about 75–80% year to date before Friday’s drop.
“This stock is up 75–80% year to date. You’re seeing a little bit of a pullback,” Vijay Rakesh, an analyst at Mizuho, said on CNBC.
He added that the firm would be buyers on the weakness, raising its price target to $450 from $435. Broadcom was trading below $364 by Friday afternoon.
The numbers themselves were hard to fault. Broadcom reported quarterly revenue of $18.02 billion, beating the $17.49 billion consensus estimate compiled by LSEG. Revenue grew 28% year on year, driven largely by a 74% surge in AI chip sales. Adjusted earnings per share came in at $1.95, comfortably ahead of expectations of $1.86.
Chief executive Hock Tan said the momentum is set to continue. Broadcom expects AI chip sales in the current quarter to double from a year earlier to $8.2 billion, supported by demand for both custom AI accelerators and networking semiconductors used in large-scale data centers.
The company also disclosed a massive $73 billion backlog of AI-related orders over the next 18 months, highlighting the depth of commitments from customers racing to secure compute capacity. That backlog includes $21 billion in orders from Anthropic, which Broadcom named as a key customer.
Still, investors zeroed in on the fine print. One major concern is margin pressure, at least in the near term. Chief financial officer Kirsten Spears warned on the earnings call that “gross margins will be lower” for certain AI chip systems because Broadcom must purchase more components upfront to build complete server racks. In a market where expectations are already sky-high, even temporary margin compression can be enough to trigger a selloff.
There was also disappointment around OpenAI. While Broadcom has touted a multibillion-dollar agreement announced in October, Tan tempered expectations, telling investors that “we do not expect much in ’26,” cooling hopes that the deal would materially boost revenue in the near term.
Bernstein analyst Stacy Rasgon described the market reaction as driven by “AI angst” rather than fundamentals.
“Frankly we aren’t sure what else one could desire as the company’s AI story continues to not only overdeliver but is doing it at an accelerating rate,” Rasgon wrote, reiterating a buy rating and lifting his price target.
The skepticism has been even sharper for Oracle. Despite beating earnings expectations, the company missed on revenue and failed to provide enough clarity on how it plans to finance its aggressive AI-driven infrastructure expansion. The stock is now down more than 40% from its September record, as investors grow wary of the heavy debt load required to keep pace in the AI arms race.
CoreWeave offers another cautionary tale. The data-center operator, which rents out AI-focused cloud infrastructure, fell 9% on Friday and has lost more than half its value since peaking in June, reflecting concerns about capital intensity and long-term returns.
Taken together, the moves point to a market that is no longer willing to reward AI exposure at any price. The theme that has dominated equities and corporate strategy is still intact, but investors are becoming more selective, focusing less on headline growth and more on margins, cash flow, and balance-sheet risk.
However, some analysts believe the selloff may prove temporary for Broadcom if demand continues to surge as forecast.