Despite reporting record revenues and a doubling of AI chip sales, Broadcom (AVGO) stock tumbled 11% as investors reacted to dipping margins and growing 'AI angst' in the semiconductor sector.
SAN JOSE, Calif. - In a stark illustration of the volatility currently gripping the technology sector, Broadcom Inc. (AVGO) saw its shares plummet approximately 11% in mid-December 2025, despite delivering what appeared to be a blockbuster earnings report. The semiconductor giant beat Wall Street expectations on both top and bottom lines and issued an upbeat forecast for AI demand. However, a projected dip in quarterly margins and growing investor anxiety regarding the costs of artificial intelligence infrastructure triggered a significant sell-off, marking a pivotal moment for the "AI trade."
The market's reaction underscores a shifting paradigm: revenue growth alone is no longer sufficient to satisfy investors who are increasingly scrutinizing the profitability of massive AI capital expenditures. While Broadcom confirmed that AI chip sales are expected to double in the current quarter, the narrative was hijacked by concerns over the cost of doing business in the high-stakes semiconductor arena.
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Broadcom's fiscal fourth-quarter performance for 2025 was, by traditional metrics, a success. According to reports from CNBC and Investopedia, the company posted better-than-expected earnings and revenue. The integration of VMware, acquired in late 2023, played a substantial role, helping to boost total revenue to a record high for fiscal 2024 and continuing into late 2025.
However, the catalyst for the stock's decline lay in the nuance of the financial guidance. While revenue projections were strong, Broadcom forecasted a dip in quarterly margins. Reuters reported that this specific guidance made investors "nervous about the profitability and costs of enormous investments" required to sustain the AI chip business. As Broadcom pivots aggressively into custom AI silicon, the costs associated with R&D and manufacturing are compressing the lucrative margins investors had grown accustomed to.
The concept of "AI Angst" has begun to permeate market psychology. Throughout 2025, Broadcom's stock had climbed an impressive 75% prior to this earnings release, fueled by booming demand for AI infrastructure. However, high valuations often lead to a "priced for perfection" scenario where even minor flaws in a forecast can trigger disproportionate sell-offs.
"Even with better-than-expected earnings and revenue, Broadcom slid on Friday as investors continued to grow concerned about the AI trade." - CNBC, December 12, 2025
Data from Yahoo Finance further highlights this trend, noting that while companies citing AI generally saw price increases earlier in the year, the sentiment in late 2025 has shifted toward caution regarding monetization and margin sustainability. The market is effectively asking: "You have the growth, but at what cost?"
Analysts have had to quickly recalibrate their models. Morningstar noted that Broadcom's "SAM estimate for fiscal 2027 implies significantly higher AI revenue growth over the next three years," estimating a roughly 62% annual rate from fiscal 2024. Despite this, the immediate market reaction focused on the short-term margin compression.
According to Investing.com analysis, technical levels are now being tested. The report suggests that if the pullback continues, the stock could find support around $350, with resistance levels dating back to 2024 acting as profit-taking zones. This technical weakness, combined with fundamental concerns, created a "perfect storm" for the correction.
Broadcom's stumble serves as a bellwether for the broader industry. As a key supplier of networking equipment and custom chips for hyperscalers, Broadcom's margin pressures signal that the hardware phase of the AI build-out is becoming more expensive. This has ripple effects for major tech stakeholders:
Looking ahead to 2026, the focus will likely remain on Broadcom's ability to optimize its cost structure while fulfilling its massive order book. The company stated that AI chip sales will double in the current quarter, a target that, if met without further margin degradation, could restore investor confidence.
However, the immediate path is rocky. As noted by RoboForex analysts, while revenue rose by 20% year-over-year, driven by a 46% increase in AI revenue, the market is currently prioritizing margin stability over raw growth. Broadcom must demonstrate that its aggressive expansion into AI is not just generating revenue, but doing so profitably enough to justify its premium valuation.
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