Chip stocks fell after Broadcom’s earnings result. Broadcom fell 9.8%; SOXL down 8%; Credo, Micron down over 4%; Marvell, AMD, TSMC, Applied Materials down over 2%.

Broadcom projected first-quarter revenue above Wall Street estimates on Thursday, but said that margins would fall due to a higher mix of AI revenue.

Broadcom has jumped into the AI chip business, which has investors nervous about the profitability and costs of enormous investments. The company has a backlog of $73 billion that it anticipates shipping over the next 18 months, CEO Hock Tan said on a post-earnings call, but his lieutenant said profit margins could drop.

"We expect first-quarter consolidated gross margin to be down approximately 100 basis points sequentially, primarily reflecting a higher mix of AI revenue," CFO Kirsten Spears said on the call. The margins will be affected throughout the year by the revenue mix of infrastructure, software and semiconductors.

Broadcom's AI customer concentration, coupled with future lower margins for AI system sales, drove the drop in shares, according to Kinngai Chan, senior research analyst at Summit Insights.