The S&P 500 dropped 1.1 per cent after closing at a record high on Thursday.<\/p>\n
Investors are concerned that a $21bn order from AI start-up Anthropic will drag down Broadcom\u2019s margins because of higher costs in its AI chips business.<\/p>\n
The share price fall came despite the chips group posting better than expected sales and earnings for the previous quarter, and increasing its revenue guidance for the next three months on Thursday.<\/p>\n
The Silicon Valley-based group warned investors that its gross margin for the first quarter would be lower than the previous three months because of a \u201chigher mix of AI revenue\u201d. <\/p>\n
Jonathan Zauderer, head of North America specialist sales at Citi, said: \u201cBroadcom delivered strong results but has traded off due to a weaker margin outlook and commentary that non-AI [chips] would be stable in 2026 versus some investor expectations for growth.\u201d<\/p>\n
Investors have become jittery in recent months around any sign that the vast spending by tech companies to compete in the AI race is not delivering meaningful returns. <\/p>\n
Zauderer added: \u201cOne of the issues is that the stock was up 75 [per cent] in 2025 heading into results, and on the heels of disappointment at Oracle yesterday, Broadcom was vulnerable to profit-taking.\u201d <\/p>\n
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Oracle shares suffered a steep sell-off<\/a> a day ago after the database company failed to meet analysts\u2019 estimates of revenue growth. The company dropped nearly 11 per cent on Thursday but the non-tech portion of the market helped the S&P to a closing high.<\/p>\n The database group\u2019s stock fell another 4.5 per cent on Friday after it delayed the construction of at least one of its data centres, according to a person familiar with the matter. Bloomberg first reported the delay. <\/p>\n Oracle has in recent months become a microcosm of the market\u2019s growing concerns about Big Tech\u2019s vast AI spending commitments.<\/p>\n Larry Ellison\u2019s company added almost $250bn to its market value in a single session in September when it announced deals with ChatGPT maker OpenAI. But the stock has dropped sharply since because its huge borrowing plans have begun to unnerve investors. <\/p>\n Oracle on Friday said: \u201cThere have been no delays to any sites required to meet our contractual commitments, and all milestones remain on track.\u201d<\/p>\n \u201cWe remain fully aligned with OpenAI and confident in our ability to execute against both our contractual commitments and future expansion plans,\u201d it added. <\/p>\n While tech and semiconductor stocks slipped on Friday, consumer cyclicals and industrials rose. <\/p>\n Many investors have shifted into sectors beyond tech \u2014 including homebuilders, transport groups and chemical companies \u2014 on the prospect of lower US interest rates. The Federal Reserve on Wednesday cut rates<\/a> to a three-year low.<\/p>\n Recommended<\/p>\n
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