Broadcom shares fell nearly 6% before the market open on Friday after the chipmaker warned growing sales of lower-margin custom AI processors were squeezing profitability, sparking worries that the business may be less lucrative.

An upbeat quarter doesn’t seem like enough to send Broadcom’s stock higher after a strong run so far this year.

Broadcom experienced an 11% single-day drop, but unlike Oracle, this is not driven by fundamental concerns. Read more on AVGO stock here.

The chip designer reported rapid revenue growth as demand continues to rise for chips to fill the data centers that power artificial-intelligence models.

Benchmark: With Broadcom's stock climbing more than 120% over the past year, profit-taking would have triggered a selloff regardless of the latest results, Acree said. The latest release included Anthropic orders of $21 billion over the past two quarters and an AI order backlog of $73 billion over the next six months, he added.

Broadcom posted October quarter results on December 11 after markets closed. The company’s revenue came in at $18.02 billion, solidly beating expectations of $17.46 billion. Meanwhile, adjusted earnings per share (EPS) rose 37% to $1.95, beating expectations of $1.87.

Broadcom's AI revenue soars 74% YoY, aiming to double by FQ1'26. However, the semiconductor company got hit with overblown market concerns.

Yesterday we were watching whether Broadcom could sustain its AI momentum and deliver guidance that justified its 75% rally this year. The company beat on both revenue and earnings after the bell, and CEO Hock Tan delivered the kind of forward commentary investors wanted to hear.

Some investors are selling Broadcom stock in the wake of its blockbuster financial report. That could be a costly mistake.