Broadcom shares dropped 11% on Friday, marking their steepest decline since January, even as the company reported quarterly results that exceeded market expectations. The sell-off came amid broader weakness in AI-related stocks, with investors reassessing valuations across the sector.
Oracle shares fell 4.5%, extending losses from its 10% drop a day earlier following its earnings announcement. Nvidia and AMD also slid, declining around 3% and 5% respectively. The broader market reacted to the shift in sentiment, with the Nasdaq down 1.69% and the S&P 500 lower by 1%.
AI-Linked Firms See Sharp Pullback
Companies heavily tied to AI infrastructure were hit hardest. Broadcom, which produces custom chips for major tech companies and has benefited from rapid AI expansion, saw its stock decline after a multi-year rally. Analysts attributed part of the slide to profit-taking following strong gains earlier in the year.
Mizuho analyst Vijay Rakesh described the drop as a natural correction after a strong run and reiterated a positive outlook for the company. Mizuho raised its price target to $450, while Broadcom closed the session just under $360.
Earnings Strong Despite Market Reaction
Broadcom reported revenue growth of 28% for the quarter, supported by a 74% increase in AI chip sales. Revenue reached $18.02 billion, surpassing analyst estimates, while adjusted earnings per share came in at $1.95, above expectations.
CEO Hock Tan said AI chip sales are expected to double to $8.2 billion in the current quarter. The company also disclosed a large AI order backlog worth $73 billion over the next 18 months, including $21 billion in orders from Anthropic.
However, higher upfront costs for AI hardware are expected to weigh on margins in the short term. CFO Kirsten Spears noted that gross margins would decline for certain AI systems due to increased component purchases.
Investor Concerns Extend Beyond Broadcom
Some of the pressure came from comments suggesting lower-than-expected contributions from OpenAI-related orders in 2026. Analysts including Bernstein’s Stacy Rasgon said broader “AI angst” was affecting sentiment, despite Broadcom’s strong fundamentals.
Oracle continues to face questions about financing its large-scale AI and cloud infrastructure expansion. The stock is now down more than 40% from its September peak. Meanwhile, CoreWeave fell another 10% and has lost more than half its value since June.
