MPC Morning Call 15th December 2025 – Tech Drags Markets Lower as Broadcom Outlook Cools AI Optimism
U.S. equities closed sharply lower overnight, led by a broad sell-off in technology and semiconductor stocks as investor enthusiasm around the AI trade softened.
Overnight – Tech sell-off drags Wall Street lower as AI optimism cools U.S. equities closed sharply lower overnight, led by a broad sell-off in technology and semiconductor stocks as investor enthusiasm around the AI trade softened. The S&P 500 fell 1.1%, the Nasdaq dropped 1.7%, and the Dow Jones declined 0.5%, as weakness in chipmakers triggered a wider risk-off move across markets. Sentiment turned after Broadcom weighed on the sector, reigniting concerns around stretched valuations and the timing of returns from heavy AI-related capital expenditure. While the broader macro backdrop remains supportive, the session served as a reminder that expectations for AI monetisation remain sensitive to guidance and margins. Broadcom sparks chip-led pullback Broadcom shares plunged more than 11% after the company flagged softer near-term performance in its high-margin non-AI business and indicated that a major data-centre deal with OpenAI would not generate material returns until at least 2027. While earnings and revenue guidance beat expectations and the company highlighted a sizeable US$73bn AI order backlog over the next 18 months, the market focused on margin pressures and signs that large customers may increasingly develop AI chips in-house. The move reverberated across the semiconductor complex, with NVIDIA, AMD, Micron, Lam Research and Marvell all posting sharp declines. The weakness followed Oracle’s recent downbeat outlook, reinforcing fears that AI-related investment cycles may be entering a more selective phase. Outside tech, results were mixed. Costco met revenue expectations, supported by resilient consumer demand, while Lululemon surged nearly 10% after lifting its full-year profit outlook despite announcing the departure of its CEO. Macro – Dovish Fed expectations vs valuation concerns Markets continue to price in at least 50bps of U.S. rate cuts next year amid expectations that the next Fed chair appointment will lean dovish. Strategists remain constructive on the medium-term outlook, with BCA Research citing monetary easing, fiscal support, GenAI capex and earnings growth as supportive for equities. However, they caution that valuations are extended, projecting more modest S&P 500 returns of 5–10% through 2026. Goldman Sachs echoed this view, noting that profitability among the largest technology names continues to account for roughly a quarter of total S&P 500 earnings, underscoring both their influence and concentration risk. Australia – ASX set to open lower as rate paths diverge Australian equities are expected to fall at the open, with ASX 200 futures down 0.6% ahead of today’s session. The local market is tracking the weaker U.S. lead, compounded by growing divergence between U.S. and Australian monetary policy expectations. Focus now turns to delayed U.S. non-farm payrolls data for October and November, due mid-week, which could confirm signs of a cooling U.S. labour market. Consensus expects weak job growth, potentially reinforcing expectations that the Fed is nearing the end of its easing cycle. In contrast, the RBA is still expected to tighten policy next year, widening the policy gap and adding pressure to risk assets locally.
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