Broadcom AI Boom Triggers Tech Selloff

December 12, 2025 at 19:47 UTC

4 min read

Broadcom stock chart volatility with AI chip graphics reflecting tech sector selloff

Key Points

Broadcom beat Q4 estimates with record AI-driven revenue but warned of margin pressure.
Shares of Broadcom fell around 10%–11%, dragging major AI hardware stocks lower.
Investors are shifting from “growth at any cost” to demanding clear AI returns.
Despite the selloff, Broadcom’s AI backlog has climbed to $73 billion into 2026.

Broadcom’s record AI quarter meets margin worries

Broadcom reported a strong fiscal fourth quarter, with revenue rising about 28% year over year to a record $18.0–$18.02 billion, above Wall Street expectations of roughly $17.5 billion. Adjusted earnings per share came in at $1.95, up from $1.42 a year earlier and ahead of consensus estimates of $1.87. AI semiconductor revenue surged 74% year over year to $6.4 billion, marking the 11th consecutive quarter of AI-centric growth and helping lift total fiscal 2025 revenue 24% to $64 billion. CEO Hock Tan said AI revenue for the year reached $20 billion and guided for AI semiconductor sales to double year over year to $8.2 billion in the first quarter, driven by custom AI accelerators and Ethernet AI switches. For the current quarter, Broadcom set a revenue target of $19.1 billion, about 28% above the prior-year period and ahead of analyst expectations. However, management guided for gross margins of about 76.9% in the current quarter, down from 79% a year earlier and roughly 100 basis points lower sequentially, citing a higher mix of lower-margin AI system-level sales. Tan noted that while the AI mix may weigh on gross margins, operating income is expected to benefit from scale across the business.

Anthropic orders and AI backlog highlight demand concentration

Broadcom detailed significant new AI orders that underscore robust demand but also highlight customer concentration. Tan confirmed that Anthropic was the previously unnamed hyperscale customer behind a $10 billion backlog increase in the prior quarter and disclosed that the AI start-up has placed an additional $11 billion chip order, due to be filled by late 2026. Broadcom also added a fifth custom AI chip customer with a $1 billion order for delivery in late 2026. These commitments helped push the company’s AI-related backlog to a record $73 billion, which management said provides roughly a year and a half of revenue visibility and supports growth well into 2026. At the same time, analysts flagged that the $73 billion backlog is concentrated across just five customers, raising questions about reliance on a narrow group of hyperscalers. Broadcom is investing in an advanced-packaging facility in Singapore to support expanding AI demand and ease supply bottlenecks as orders accelerate.

Stock reaction: profit-taking and AI bubble fears hit Broadcom

Despite the strong top- and bottom-line results and upbeat revenue guidance, Broadcom’s shares fell sharply on Friday. The stock dropped around 8%–11% in intraday trading, at one point poised for its largest one-day decline since an April tariff-driven selloff, and was recently down about 10.7%. The move erased more than $200 billion in market value and came after a roughly 57%–75% rally earlier in the year. Investors focused on management’s warning that gross margins will decline as AI hardware, viewed as structurally less profitable than legacy software segments, becomes a larger share of the business. Commentary that 2026 AI demand is “hard to pinpoint” added to concerns. Analysts and market commentators described the reaction as driven by margin anxiety and profit-taking, with some characterizing the shift as a reassessment of whether booming AI revenue is coming at the cost of profitability.

Broader market impact: AI trade unwinds across chipmakers

Broadcom’s guidance and margin commentary reverberated across the technology sector and broader equity markets. The Nasdaq Composite fell about 2% and the S&P 500 slipped roughly 1%, even as the Dow Jones Industrial Average edged up 0.1% to a record high. Broadcom led decliners on the S&P 500 and Nasdaq, and other AI-linked hardware names including Advanced Micro Devices, Micron Technology, Palantir, Vertiv, and Bloom Energy also traded lower. AMD shares fell about 4.3% as investors rotated out of high-valuation AI infrastructure plays following underwhelming updates from Oracle and Broadcom, with the market narrative shifting from “growth at any cost” to “prove the returns.” Oracle’s earlier revenue miss and $15 billion increase in capital expenditures for AI infrastructure had already stoked fears that AI spending is outpacing monetization. Analysts cited worries about an AI bubble, high valuations, and circular financing arrangements, even as some maintained that AI’s long-term potential remains intact and that overall AI-related spending intentions are still very large.

Key Takeaways

Broadcom’s results confirm surging AI demand, but investors are now scrutinizing profitability and margin trends rather than revenue growth alone.
A large, multi-year AI backlog anchored by a handful of hyperscale customers provides visibility but also concentrates Broadcom’s growth risk.
The sharp selloff in Broadcom and peers shows that AI hardware stocks are sensitive to any signs that AI growth may be more costly or less predictable than previously assumed.