Chip giant Broadcom is competing with Nvidia for revenue in AI computing, but its sales outlook for the AI market fell short of investors' high expectations, triggering its biggest stock drop in 10 months.
After CEO Hock Tan made unsettling remarks during an analyst call, Broadcom's shares plunged 12% during Friday's trading session in New York, marking the steepest intraday decline since late January. Tan revealed that the company's AI product backlog for the next six quarters totals $73 billion—a figure that disappointed some investors. However, he clarified that this was the "minimum value."
"As more shipments are confirmed over the next six quarters, we expect the final order size to be significantly higher," Tan said. "Delivery cycles vary by product, ranging roughly from six months to a year."
Prior to the call, Broadcom's stock had surged sharply, with investors hoping for clearer insights into the timeline and profitability of its AI business. Instead, they received vague guidance—no 2026 AI revenue forecast and concerns about narrowing margins.
Just a day before Broadcom's outlook, Oracle, another Wall Street-favored AI stock, also released unsettling earnings. Oracle's shares tumbled 11% on Thursday due to rising data center costs, sparking worries about its AI prospects.
On Friday, news emerged that Oracle had delayed the completion of some data centers built for OpenAI, further pressuring its stock.
Although Tan disclosed that Broadcom secured an $11 billion order from AI startup Anthropic in Q4, he warned that AI product sales were compressing overall margins.
Broadcom has yet to provide an annual AI revenue forecast, with Tan calling it a "moving target."
"It's difficult to predict 2026 with precision," he said. "So I’m reluctant to offer any guidance."
The call followed Broadcom’s largely positive earnings report on Thursday. The company projected Q1 2026 revenue of $19.1 billion, surpassing analysts' $18.5 billion consensus. It also raised its quarterly dividend by 10% to $0.65 per share.
Tan noted that after securing a $10 billion order from Anthropic in Q3, Broadcom landed another $11 billion deal in Q4. A separate $1 billion order was signed with an undisclosed customer.
Amid booming demand for custom chips in large-scale data centers, Broadcom continues expanding its share in the AI chip market, where Nvidia remains dominant.
Tan said Q1 AI semiconductor revenue would double year-over-year to $8.2 billion.
Broadcom's recent spotlight stems partly from partnerships with leading AI model providers. OpenAI has contracted Broadcom for custom AI chip designs, while Anthropic committed to using billions in Google Cloud TPU services—which also rely on Broadcom’s designs—bolstering investor confidence.
On Thursday, Broadcom closed at $406.37 in New York, up 75% year-to-date.
The Palo Alto-based company operates across communications chips, networking hardware, and software.
To capitalize on AI, Broadcom is upgrading networking equipment to accelerate data transfers within and between data centers—a critical need as AI models grow more complex.
In Q4 2025 (ended November 2), revenue hit $18 billion, with adjusted EPS rising to $1.95, beating estimates of $17.5 billion and $1.87, respectively.
In October, Broadcom partnered with OpenAI to supply custom chips and networking components for AI services, boosting its custom chip division and deepening its AI market presence. Despite growth, Broadcom still trails Nvidia in AI processors.
If Broadcom achieves long-term AI revenue targets, Tan stands to gain substantially. Under an incentive plan, hitting $90 billion in AI revenue by fiscal 2030 would earn him 610,521 shares; $120 billion would triple that reward.
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