Wall Street's AI infrastructure rally shows signs of fatigue as Broadcom and Oracle shares decline sharply, signaling a shift in investor sentiment despite strong recent performance in the sector.
- Broadcom (AVGO) fell 6.8%, losing over $20 billion in market value
- Oracle (ORCL) declined 5.3%, shedding more than $45 billion in valuation
- Broadcom reported $13.2 billion in revenue, Oracle $13.1 billion in cloud revenue
- AI infrastructure index dropped 4.1% — largest single-day fall since September 2024
- AI hardware demand growth slowed to 75% YoY from a peak of 100%+ in early 2024
- Investor focus shifting from top-line growth to sustainable margins and cash flow
Broadcom Inc. (AVGO) saw its stock fall 6.8% on Tuesday, erasing more than $20 billion in market value, while Oracle Corporation (ORCL) dropped 5.3%, shedding over $45 billion in valuation. The sell-off follows a wave of profit-taking after both companies reported robust fiscal fourth-quarter results earlier in the month, with Broadcom posting $13.2 billion in revenue and Oracle delivering $13.1 billion in cloud revenue — both surpassing analyst expectations. Despite solid financials, investor confidence waned as concerns mounted over elevated valuations and potential saturation in AI chip demand. Analysts noted that Broadcom’s guidance for the next quarter implied slower growth in data center infrastructure spending, particularly in the AI accelerator segment, where demand may be cooling after a 75% year-over-year spike in 2024. Oracle’s cloud infrastructure revenue, although up 28% year-over-year, showed a deceleration in growth momentum compared to the 40% increase seen in Q3. The broader AI infrastructure index, which tracks major semiconductor and cloud infrastructure providers, declined 4.1% on the day, marking its largest single-day drop since September 2024. Key components including Nvidia (NVDA) and AMD (AMD) also experienced modest declines, though they remained above their 52-week lows. The move reflects a broader reassessment of AI-related growth expectations, with several Wall Street firms downgrading their short-term outlooks for infrastructure plays. Market participants are now focusing on cash flow generation and sustainable margins rather than pure top-line growth, particularly as AI deployment cycles extend beyond initial hype. The shift impacts not only tech investors but also industrial and infrastructure suppliers tied to data center expansion, including companies providing cooling systems, power management, and fiber optics. As the AI boom matures, the market appears to be pricing in a more measured pace of capital expenditure in the coming quarters.