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.

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

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.

The red-hot trade backing artificial intelligence (AI)-related stocks has taken a bruising from back-to-back troubling updates from Oracle and Broadcom, reigniting concerns about frothy valuations and an AI bubble.

Investors pulled back from the chip firm despite beating Wall Street’s expectations for quarterly earnings and revenue.

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.

Goldman Sachs analyst Kash Rangan lowered its price target to $220 from $320, while maintaining a neutral rating. Rangan cited modest reported revenue growth and noted that higher capital expenditures and free cash flow burn increased concerns over Oracle’s growing financial needs.