Broadcom nasdaq avgo shares drop 5.59% amid ai sector sell off as investor sentiment cools post earnings

Shares of Broadcom (NASDAQ: AVGO) dropped 5.59% in pre-market trading on December 16, 2025, amid a broader sell-off in AI-related stocks. The decline reflected cooling investor sentiment toward the sector following recent earnings reports.

The selloff coincided with broader market weakness, as the Nasdaq Composite fell 0.6%. Broadcom’s pullback was attributed to concerns over margin pressures in its AI business. CEO Hock Tan highlighted during the earnings call that AI segments operate at lower gross margins compared to other divisions, raising questions about long-term profitability as AI revenue grows to a larger share of total sales.

Investor anxiety intensified after Oracle’s earnings report revealed ballooning AI-related capital expenditures, amplifying fears of a potential AI bubble. Despite Broadcom’s record revenue and net income, the market fixated on structural risks, including the risk of customers shifting design work in-house and the high cost of infrastructure expansion. These factors overshadowed strong AI growth metrics, such as 74% year-over-year revenue gains in its AI segment.

Analysts noted that Broadcom’s forward P/E ratio of 39 and elevated forward price-to-sales multiples remain under scrutiny, though the stock’s valuation has retreated from recent highs. The dip has sparked debates about whether the correction represents a buying opportunity or a sign of deeper sector-wide challenges.