Dec 12 (Reuters) – Broadcom shares fell nearly 5% before the market open on Friday after the chipmaker said its margins would fall due to a higher mix of AI revenue, adding to worries about the payout from AI. Investor optimism over the nascent technology has recently cooled amid bubble concerns, wiping out hundreds of billions in tech market value since late October.Adding to the worries, Oracle's massive spending and weak forecasts fanned doubts over how quickly the big bets on AI will pay off, sparking a tech selloff in the previous session. "Right now, the spending intentions still seem so big by so many, hitting that panic button is premature," said Ben Reitzes, analyst at Melius Research. Broadcom's margins will be affected throughout the year by the revenue mix of infrastructure, software and semiconductors, while it has a $73 billion backlog that it anticipates shipping over the next 18 months. "We attribute the selloff to commentary on gross margin dilution from AI chips. We aren't concerned with this, given that these chips are operating-margin-accretive," said analysts at Morningstar. Broadcom has gained from strong demand for its custom chips amid a major data center buildout, securing a growing foothold in an industry led by Nvidia, with its stock rising nearly 75% this year. The chipmaker posted fourth-quarter revenue that topped estimates and projected first-quarter revenue of about $19.1 billion, above expectations of $18.27 billion, according to data compiled by LSEG. Broadcom works with hyperscale cloud providers such as Google and Meta Platforms to design and manufacture the processors, offering a key alternative to Nvidia's graphics processing units. Big U.S. cloud providers are expected to spend more than $400 billion on AI this year to build out data centers needed to support services such as ChatGPT and Gemini. (Reporting by Alun John in London and Joel Jose in Bengaluru; Editing by Amanda Cooper and Arun Koyyur)
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