Shares of Broadcom (AVGO) dropped around 5% premarket on Friday after its fourth-quarter earnings results and amid a broader selloff in the AI and tech space.
The chipmaker reported better-than-expected results for Q4 and guidance, buoyed by a continued AI spending boom, leading to a rise in share prices in extended trading on Thursday, but premarket trading has reversed the trend, with investors appearing cautious of AI returns.
In the post-earnings call, CFO Kirsten Spears noted margin pressures in the near term.
“We expect Q1 consolidated gross margin to be down approximately 100 basis points sequentially, primarily reflecting a higher mix of AI revenue. As a reminder, consolidated gross margins through the year will be impacted by the revenue mix of Infrastructure Software and Semiconductors and also product mix within Semiconductors,” the executive said.
Meanwhile, CEO Hock Tan said the company has a $73 billion backlog in AI product orders scheduled for delivery over the next six quarters—a figure that left some investors underwhelmed. Tan later clarified that this amount represents a “minimum” level of expected shipments.
Tan said “We do expect much more as more orders come in for shipments within that next six quarters. “So our lead time, depending on the particular product it is, can be anywhere from six months to a year.”
Broadcom’s (AVGO) premarket dip also seems to be mirroring a larger decline in the AI space amid concerns of an AI bubble. U.S. AI names were trading in red in Friday premarket for the third day. Oracle (ORCL) is down 0.9%, as are Nvidia (NVDA) -0.8%, Micron (MU) -1.7% and CoreWeave (CRWV) -1.2%.