Broadcom AI Profit Warning Reignites Market Fears Over Tech Bubble
New York, Friday, 12 December 2025.
Markets slipped as Broadcom’s margin warning reignited bubble fears, overshadowing a projection that AI revenue will double to $8.2 billion in the first quarter.
Margin Pressures Weigh on Market Sentiment
On Friday, December 12, 2025, U.S. stock futures retreated as investors grappled with renewed concerns regarding the sustainability of artificial intelligence valuations. Futures for both the S&P 500 and Nasdaq declined after Broadcom (AVGO) issued a cautious outlook on its profit margins, reigniting fears of an AI-fueled market bubble [1]. Despite the Federal Reserve offering a more optimistic policy trajectory for 2026, the immediate anxieties surrounding semiconductor profitability took precedence, causing Broadcom shares to fall nearly 6% in premarket trading [1]. This selloff reflects a growing market sensitivity to the costs associated with AI infrastructure, even as demand for the technology remains robust [2].
Revenue Growth vs. Profitability Squeeze
While the margin guidance soured investor sentiment, Broadcom’s realized financial performance for the fiscal fourth quarter ending November 2, 2025, was undeniably strong. The company reported net revenue of $18.015 billion, marking a significant increase of 3.961 billion from the $14.054 billion reported in the same quarter the previous year [4]. This represents a 28% year-over-year surge, driven largely by AI semiconductor revenue, which management noted had increased by 74% compared to the prior year [4]. Looking ahead, CEO Hock Tan projected that AI semiconductor revenue would double year-over-year to $8.2 billion in the first fiscal quarter of 2026, fueled by demand for custom AI accelerators and Ethernet switches [4].
Monetary Policy and Sector Rotation
The tech sector’s weakness notably overshadowed positive developments on the macroeconomic front. The Federal Reserve recently provided commentary signaling a less hawkish stance regarding interest rate cuts in 2026, offering potential relief for borrowing costs [1]. Market participants are now pricing in 50 basis points of rate cuts by the end of 2026, a more aggressive easing path than previously signaled by the central bank [1]. Under normal circumstances, such news might buoy growth stocks; however, analysts observe a rotation underway as investors move capital out of high-flying tech names and into value-heavy sectors that appear relatively cheap and are poised to benefit from the anticipated rate cuts [1].