U.S. tech stocks were lower again on Dec. 12 as investors continued to reassess the sector’s rapid run-up. Oracle (ORCL) shares sank 10.83% on Dec. 11 and slipped another 4.66% on Dec. 12, extending a sharp selloff that followed the company’s latest earnings report. The weakness, combined with Broadcom’s (AVGO) pullback despite delivering a solid quarter, has added to growing concerns of an AI bubble. Oracle, the 48-year-old cloud and database software company, reported quarterly results on Dec. 10 that ...

On this week’s episode of Everybody’s Business, @reckless joins @chafkin and @svaneksmith to unpack President Donald Trump’s decision to lift export restrictions on AI chips made by Nvidia, AMD and Intel and why it may not be enough to stop the AI bubble from bursting https://t.co/qSwm0RcP17 ...

Major stock indexes fell Friday as technology shares remained under pressure on AI bubble fears. The tech-heavy Nasdaq sank, and the S&P 500 and Dow Jones Industrial Average pulled back from records. https://t.co/gRRjXZQPS2 ...

Key Takeaways Broadcom's custom AI chip business is growing rapidly. Wall Street, however, is wary about how much upside that growth suggests. Broadcom (AVGO) on Thursday predicted its AI-related revenue will double year-over-year to $8.2 billion in the current quarter. That would be an acceleration from the most recent quarter, when it grew 74% to $6.5 billion. But the forecast came with a caveat—and that weighed on the shares today. The stock was recently down about 10% in intraday trading. Broadcom expec ...

On this week’s episode of Everybody’s Business, @reckless joins @chafkin and @svaneksmith to unpack President Donald Trump’s decision to lift export restrictions on AI chips made by Nvidia, AMD and Intel and why it may not be enough to stop the AI bubble from bursting https://t.co/qSwm0RcP17 ...

Market Overview - The Dow is up approximately 670 points, while the S&P 500 is up about 0.2%, and the NASDAQ is down about 0.3% [1] - Investors are looking beyond big tech and the AI trade following the Fed's third consecutive rate cut [9] Oracle's Performance - Oracle's stock is facing significant declines due to concerns over AI buildout and missed earnings expectations [2][67] - The company has a substantial commitment to OpenAI, but there are doubts about OpenAI's ability to fulfill its financial commitments, leading to concerns about Oracle's future revenue [70][75] Crypto Regulation Developments - Executives from major banks, including Bank of America and Wells Fargo, are meeting with lawmakers to discuss comprehensive crypto legislation [3][4] - The focus of the discussions includes bank permissibility and interest paid on crypto, with banks aiming to influence the legislation [5][6] Federal Reserve Insights - The Fed has revised its GDP growth forecast for next year to 2.3%, with inflation expected to fall to 2.5% and unemployment holding at 4.4% [35][39] - Economists express skepticism about the Fed's projections, suggesting that growth could be higher than anticipated due to strong productivity trends [36][41] AI Market Dynamics - There are concerns about an AI bubble, with only two of the MAG 7 outperforming the broader market index [23] - Analysts suggest that capital is leaking out of the AI trade, and companies like Oracle may struggle to maintain their market positions due to overleveraging [24][25] Adobe's AI Integration - Adobe reported record revenue and cash flows, with a forecast of over 10% growth in annual recurring revenue, driven by the integration of AI into its software [102][104] - The company is focusing on innovation and investing in AI capabilities to enhance its product offerings [106][110]

Core Viewpoint - The market is currently exhibiting a lack of confidence in the growth potential of certain companies, particularly in the AI and cloud sectors, despite strong demand for compute resources [2][3][9]. Group 1: Market Sentiment and Demand - There is a perception of a timing mismatch in the market, leading to an over-penalization of certain companies despite their growth [1]. - The demand for compute resources is described as insatiable, not only for specific companies but also for other hyperscalers [2]. - Companies like Microsoft have reported higher demand for their cloud services than they could supply, indicating a robust market demand [3]. Group 2: Financial Health and Debt Management - The company expects to maintain investment-grade credit and does not anticipate needing to exceed $100 billion in debt [3]. - The current debt level stands at $106 billion, with negative free cash flows reported at $10 billion [4]. - There are flexible options available for managing debt, including leasing and equity issuance, which the company is considering [6]. Group 3: Stock Performance and Valuation - A significant reduction in the price target for the stock from $400 to $275 reflects market conditions rather than a change in the company's fundamentals [8]. - For the stock to regain higher valuations, there needs to be clear evidence of outperformance in cloud revenue [9]. - The company is positioned as the fastest-growing and cheapest megacap software company, which could lead to a recovery in stock prices as market confidence returns [9]. Group 4: Industry Trends and Future Outlook - The industry is experiencing a renaissance in software development driven by increased compute availability, particularly in AI [12]. - Traditional knowledge workers are still awaiting significant productivity improvements, indicating a varied experience across different roles [13]. - The company has made a swift pivot to the AI compute cycle, which is expected to benefit its existing customer base and align with broader industry trends [16].

Core Viewpoint - Broadcom projected first-quarter revenue above Wall Street estimates but indicated that margins would decline due to a higher mix of AI revenue, leading to a 5% drop in shares during extended trading [1]. Group 1: Financial Projections - Broadcom anticipates first-quarter revenue of approximately $19.1 billion, exceeding analysts' average estimate of $18.27 billion [7]. - The company reported fourth-quarter revenue of $18.02 billion, surpassing estimates of $17.49 billion [7]. - AI semiconductor revenue is expected to double to $8.2 billion in the fiscal first quarter [7]. Group 2: Margin Concerns - The consolidated gross margin is expected to decline by approximately 100 basis points sequentially, primarily due to a higher mix of AI revenue [3]. - Profit margins may be affected throughout the year by the revenue mix of infrastructure, software, and semiconductors [3]. - The backlog of $73 billion is concentrated among only five customers, with system sales expected to carry lower gross margins [4]. Group 3: Industry Context - U.S. cloud providers are projected to spend over $400 billion on AI this year to enhance data centers for services like ChatGPT and Copilot [6]. - Concerns about an AI bubble are rising due to increasing spending, limited evidence of productivity gains, and high valuations [6]. - Broadcom's AI chip business is seen as a key alternative to Nvidia's graphics processing units, with partnerships with major cloud providers like Google and Meta Platforms [5].

Core Insights - Bill Gates warns that not all AI stocks will succeed, indicating a hyper-competitive environment where many companies may not maintain their high valuations [1][8] - The AI boom has significantly driven stock market rallies, but recent months have seen a slowdown due to concerns over high valuations and potential overspending by tech giants [2][8] Investment Landscape - Major tech companies, referred to as hyperscalers, are projected to invest $400 billion in AI infrastructure this year and over $500 billion next year [1] - Companies like Palantir have extremely high price-to-earnings (P/E) ratios, with Palantir exceeding 400, while chip designers Broadcom and AMD have P/E ratios above 100 [3] - OpenAI, valued at $500 billion, is an example of a startup with high valuations despite not being profitable, expected to remain unprofitable until the end of the decade [4] Market Dynamics - The demand for AI has positively impacted the sales and profits of major cloud computing businesses, with Alphabet, Microsoft, and Amazon maintaining P/E ratios around 30 [5] - Nvidia's strong demand for chips has elevated its market capitalization to $4.5 trillion, with shares trading at a P/E ratio of 45 [5] - Despite valuation concerns, investors have historically bought the dip in tech stocks, leading to a recovery in the Nasdaq Composite, which is close to its record high [7] Future Outlook - Gates expresses confidence in AI's transformative potential across various sectors, including health, education, and agriculture, despite the current valuation concerns [7]

Shares of Oracle plunged 14% Thursday morning and sent a shiver through the entire AI trade as investors questioned the sustainability of Big Tech's spending. ...