Thematic Spotlight: AI Earnings Send Mixed Signals to Investors

The artificial intelligence boom has driven record-breaking investments, but recent earnings reports are sending conflicting messages about the sector’s long-term viability. On one hand, Broadcom Inc. posted stronger-than-expected results, fuelled by surging demand for its AI chips. On the other, Hewlett Packard Enterprise (HPE) tumbled on its earnings report, weighed down by weak margins and poorer than expected profits.

For bullish AI investors, Broadcom’s latest earnings reaffirm that AI infrastructure spending remains strong, particularly among hyperscalers—giant data centre operators that rely on custom AI chips. The company’s semiconductor revenue climbed 11% last quarter, and CEO Hock Tan revealed that Broadcom is expanding its AI chip production for major tech clients like Google and Meta.1 With new hyperscaler customers on the horizon, the company appears to be positioned for continued AI-driven growth. Investors responded favourably, sending Broadcom’s stock up nearly 7%, a much needed rebound after a rough start to the year.2

However, HPE’s latest earnings told a different story. The company, which supplies servers—including AI-specific systems—to enterprises, saw its profit forecast fall well below expectations.3 Even as demand for AI servers surged, HPE has struggled with tight margins, driven largely by the high cost of Nvidia’s AI chips, but also an excess inventory of older semiconductors.4 HPE also blamed tariffs, and other inefficiencies for the weakness of its growth-engine server unit. The company’s stock dropped 12% on the report, its worst single day decline since 2020.5

The disparity between Broadcom and HPE highlights the uneven nature of the AI boom, a stark contrast to just a year ago where AI-adjacent names appeared to benefit across the board. As such, Investors looking for clear signals about AI’s trajectory have been left with a fragmented picture. One thing is for sure, as the AI megatrend evolves at breakneck pace, investors should pay close attention to the next few quarters as an indicator of the health and staying power of each segment of the industry.

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