Broadcom shares fell 5.59% as market skepticism grows over AI revenue sustainability

Broadcom shares fell 5.59% in pre-market trading on December 16, 2025, marking a sharp decline ahead of the opening bell.

The drop follows a recent upgrade from Morgan Stanley, which raised its price target for the stock to $462 from $443—a 28% increase. However, analysts note the move may reflect broader market skepticism about the sustainability of Broadcom’s AI-driven revenue growth, particularly as valuations reach stratospheric levels. The stock has surged on AI demand but faces scrutiny over whether its high margins and growth trajectory can be maintained.

While the company’s AI segment reported a 74% year-over-year revenue increase, some investors are concerned that the current valuation—trading at nearly 17 times forward sales—may not be justified. The recent pullback could indicate a shift in sentiment as the market weighs long-term risks in the AI sector, including potential overvaluation and competition from rivals.

Analysts suggest that the stock’s performance may hinge on Broadcom’s ability to sustain innovation and market share in AI, while also managing rising expectations from investors. The market is closely watching whether the company can maintain its leadership in AI infrastructure and navigate macroeconomic headwinds without compromising its financial health.