Broadcom delivered quarterly earnings and forward guidance that comfortably exceeded Wall Street expectations. Yet the market reaction told a very different story.

Despite its strong performance, Broadcom’s stock suffered a sharp selloff on Friday, plunging 11 percent in its worst single-day decline since January. The drop reflected a broader retreat from artificial intelligence–related stocks, as investors abruptly cooled on a trade that had dominated the market for much of the year. Oracle shares also continued their downward spiral, falling another 4.5 percent just one day after tumbling 10 percent following the company’s earnings release.

Other major players in the AI hardware space were not spared. Nvidia, the dominant supplier of graphics processing units used in AI computing, slid roughly 3 percent, while Advanced Micro Devices declined about 5 percent.

Artificial intelligence has been a major engine powering both the stock market and the broader economy in 2025, which means any shift in sentiment carries wider implications. On Friday, the Nasdaq Composite dropped approximately 1.69 percent, while the S&P 500 fell about 1 percent, signaling a coordinated pullback across technology-heavy indices.

The stocks facing the most pressure were those most directly exposed to AI infrastructure spending. Over the past two years, hyperscale cloud providers have poured billions into building data centers to meet what they describe as relentless demand for AI computing capacity. Broadcom has been a central beneficiary of that expansion, producing custom chips for some of the world’s largest technology companies. Its market value roughly doubled in each of the past two years and continued climbing into 2025 before the latest reversal.

“This stock has already gained around 75 to 80 percent this year,” said Vijay Rakesh, an analyst at Mizuho, during an appearance on CNBC’s Squawk on the Street. “What we’re seeing now is a modest pullback. From our perspective, this creates a buying opportunity.”

Mizuho recently raised its price target on Broadcom shares to $450 from $435. Even after Friday’s steep decline, the stock closed just under $360.

Rakesh emphasized that Broadcom remains firmly positioned at the center of the AI growth story. According to him, the company continues to supply critical hardware across the entire technology stack for major customers including Google and Meta, as well as emerging AI-focused firms such as Anthropic. He also noted that OpenAI could become a more meaningful contributor over time.

Broadcom’s latest earnings report underscored the strength of its AI business. Revenue for the quarter climbed 28 percent year over year, driven largely by a 74 percent surge in AI-related chip sales. Total revenue reached $18.02 billion, surpassing the $17.49 billion consensus estimate compiled by LSEG. Adjusted earnings came in at $1.95 per share, also beating analysts’ expectations of $1.86.

Chief executive officer Hock Tan said the momentum is expected to continue. Broadcom projects that AI chip revenue in the current quarter will double compared with the same period last year, reaching approximately $8.2 billion. This growth will come from both custom AI processors and networking semiconductors designed for large-scale AI systems.

However, not all aspects of the outlook reassured investors. One recurring concern is pressure on profit margins in the near term, largely due to higher upfront costs associated with scaling production. Chief financial officer Kirsten Spears explained during the earnings call that gross margins for certain AI systems would decline temporarily, as Broadcom needs to purchase more components to assemble complete server racks.

Still, the company’s order book remains substantial. Broadcom disclosed an AI-related backlog of $73 billion expected to be fulfilled over the next 18 months. Included in that figure is $21 billion in orders from Anthropic, which Broadcom publicly identified as a major customer earlier this week.

While OpenAI has attracted significant attention following a multibillion-dollar agreement announced in October, expectations around near-term revenue contributions were tempered. Tan told investors that the company does not anticipate meaningful revenue impact from that partnership in 2026.

Bernstein analyst Stacy Rasgon attributed Broadcom’s stock decline primarily to what he described as growing anxiety around AI valuations. In a note to clients on Friday, Rasgon argued that the market reaction was difficult to justify given the company’s execution.

“Frankly, it’s hard to imagine what more investors could ask for,” Rasgon wrote, noting that Broadcom’s AI business has consistently exceeded expectations and is expanding at an accelerating pace. Rasgon maintains a buy rating on the stock and recently raised his price target.

Oracle, by contrast, is facing far deeper skepticism. The company’s shares have fallen more than 40 percent from the all-time high reached in September. Although Oracle exceeded earnings expectations in its latest report, it fell short on revenue. Investors were also disappointed by the lack of clarity regarding how the company plans to finance its massive AI-driven infrastructure expansion, which so far has relied heavily on debt.

The selloff extended to smaller but highly exposed players as well. CoreWeave, a company focused on building data centers to deliver cloud-based AI services, dropped 10 percent on Friday. Since peaking in June, CoreWeave’s stock has lost more than half of its value, underscoring how quickly sentiment can shift in even the most promising corners of the AI market.

As enthusiasm for artificial intelligence recalibrates, investors appear to be reassessing not just growth potential, but also valuation, financing risks, and near-term profitability across the sector.