Broadcom is once again at the centre of mounting investor unease, as doubts rise over heavy spending on artificial intelligence infrastructure and the returns it can generate. The pullback reflects weakening confidence in companies closely tied to large scale AI buildouts, with markets reassessing whether aggressive investment plans will pay off.
Broadcom, CoreWeave and Oracle all posted further losses on Wall Street on Monday after steep declines last week. While the stocks remain higher for the year overall, with CoreWeave having gone public in March, the latest trend points to unease about how long heavy spending can be sustained. Matt Witheiler of Wellington Management said on a television program, “It definitely requires the ROI to be there to keep funding this AI investment.” He added, “From what we’ve seen so far that ROI is there.” Witheiler also noted that “every single AI company on the planet is saying if you give me more compute I can make more revenue.”
Investor sentiment turned sour after recent earnings from Broadcom and Oracle. Both companies beat revenue estimates and signaled strong AI demand, yet markets reacted negatively. Oracle is now leaning heavily on debt to fund its data center expansion and offered limited clarity on future financing. The company raised its capital spending forecast for the current fiscal year to $50 billion from $35 billion, driven by new deals with Meta and Nvidia. Oracle also disclosed $248 billion in long term lease commitments as of Nov. 30, covering periods of 15 to 19 years, up 148% since late August.
Broadcom also flagged pressure on profitability. CEO Hock Tan said AI chip sales are expected to double year over year to $8.2 billion this quarter, fueled by custom chips and AI networking hardware. However, CFO Kirsten Spears warned investors that “gross margins will be lower” for some AI chip systems due to higher costs. Broadcom shares fell 5.6% on Monday after an 11% drop on Friday and now sit 18% below their recent record high.
Oracle shares slipped 2.7% on Monday and are down 17% over 3 sessions. The stock has fallen 46% since Sept. 10. Venture capitalist Tomasz Tunguz wrote in a blog that Oracle’s debt to equity ratio has reached 500%, far above peers such as Amazon, Microsoft, Meta and Google at 7% to 23%. He said CoreWeave also carries elevated leverage at 120%. CoreWeave shares fell about 8% on Monday and are down more than 60% from their June peak.
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