Breakfast News: Broadcom Guides Lower

December 12, 2025

1. Broadcom Slides 5% on Margin Pressure

Rule Breakers recommendation Broadcom (AVGO +0.37%) was down over 5% in pre-market trading, as quarterly results contained disappointing guidance on shrinking profit margins, driven by a shift in revenue mix.

• "It's hard for me to pinpoint what '26 is going to look like precisely": CEO Hock Tan held off giving an annual AI revenue forecast, saying it was very much a moving target, but did reveal Anthropic as the company behind the large $11 billion order during the quarter.
• "We do expect much more as more orders come in for shipments within that next six quarters": Tan noted a $73 billion AI product order backlog, lower than what some expected. The changing product mix toward lower-margin AI components is due to send gross profit margins lower by 1% in the coming quarter alone.

2. LULU & RH Impress as COST Underwhelms

Stock Advisor rec Lululemon (LULU -0.51%) rocketed over 10% higher ahead of the market open thanks to a strong earnings beat, with outgoing CEO Calvin McDonald saying, "as we enter the holiday season, we are encouraged by our early performance."

• "They're looking for value and for quality and for newness": Costco (COST -0.24%) edged down marginally before the opening bell after posting results, with CFO Gary Millerchip explaining how price-sensitive shoppers are hunting for value.
• "The worst housing market in almost 50 years and the polarizing impact of tariffs": RH (RH -0.41%) gained more than 6% in pre-market trade after results showed a 9% quarterly net revenue increase, despite the difficult market backdrop that CEO Gary Friedman spoke about.

3. Diversification Pays as Nasdaq Dips

The S&P 500, Dow Jones, and Russell 2000 indices all closed at fresh record highs – in contrast to the tech-heavy Nasdaq, which fell by 0.25% on the day, highlighting the value in owning a diversified portfolio.

• AI sentiment takes a short-term wobble: Market bellwether Nvidia (NVDA +2.93%) fell 1.55%, with Intel (INTC -1.02%) and Marvell Technology (MRVL +2.32%) losing over 3%. Nvidia is still beating the S&P 500 by 62% since the May 2024 Rule Breakers rec.
• Three Foolish tips for building a diversified portfolio: Holding at least 25 stocks across various industries, having a portion of funds in fixed-income securities, and considering investing in real estate (or real estate investment trusts) can help to smooth out long-term performance.

4. Reddit Challenges Australia Social Law

Reddit (RDDT -20.99%) has launched a legal case against the Australian social media ban for teens under 16, asserting it infringes on free political discourse and is ineffective. The stock was flat heading into the market open.

• "Reasonable steps" needed to prevent underage access: The new law, which came into effect on Wednesday, targeted ten major social media platforms, with Reddit's request seeking to make the law either invalid or to exclude it from the application.
• "Reddit remains relevant and prolific": Last month, Fool contributing analyst Rick Munarriz commented "there is upside as it continues on its path of global monetization, particularly with its international visitors."

5. Would You Rather?

Today we're asking whether you'd rather start a position in JPMorgan Chase (JPM +0.27%) or Walmart (WMT +0.09%) today, and why? The companies are currently the closest to the $1 trillion market cap that have never reached the milestone before (last month, Eli Lilly (LLY -0.53%) became the first pharmaceutical company ever to reach $1 trillion, though has since slipped back down). Debate with friends and family, or become a member to hear what your fellow Fools are saying!