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US tech stocks fell on Friday, as a sharp decline in Broadcom’s shares following the chipmaker’s earnings underlined investors’ nervousness about high valuations in companies linked to the artificial intelligence boom.
The tech-heavy Nasdaq Composite fell 2.1 per cent by mid-morning in New York. Broadcom tumbled 10 per cent after investors were disappointed with the company’s sales outlook.
The S&P 500 dropped 1.2 per cent from Thursday’s record.
The move comes a day after a steep sell-off in Oracle shares, after the database company failed to meet analysts’ estimates of revenue growth. Oracle dropped 10 per cent on Wednesday, but the non-tech portion of the market still helped the S&P to a closing high.
Oracle stock fell another 5 per cent on Friday after the company was forced to delay the construction of at least one of its data centres, according to a person familiar with the matter. Bloomberg first reported the delay. Oracle declined to comment.
Broadcom meanwhile reported better than expected sales and earnings for the last quarter and increased its guidance for the next three months on Thursday, driven by strong sales of the AI chips that it helps companies including Google to develop.
However, some investors were concerned that a $21bn order from AI start-up Anthropic would drag down Broadcom’s margins.
The Silicon Valley-based tech group, which also owns software provider VMware and a range of networking and cyber security tools, warned investors that its gross margin for the first quarter would be lower than the previous three months, owing to a “higher mix of AI revenue”.
“We believe the lower gross margin guidance caused the stock to trade lower,” analysts at Citi said in a note to clients on Friday.
US government bonds also came under pressure as investors continued to digest the language from the Federal Reserve meeting on Wednesday.
The yield on the benchmark 10-year US Treasury rose 0.04 percentage points to 4.18 per cent. Yields move inversely to prices.
Additional reporting by Rafe Rosner-Uddin
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