Broadcom, Costco results; Lululemon CEO to depart - what’s moving markets

Adam

Summary:

U.S. futures were mixed as Broadcom warned AI margins may shrink, Costco beat estimates on value demand, Lululemon shares jumped on CEO exit, and oil rose on Venezuelan supply concerns.

Futures linked to the main U.S. stock indices suggest a mixed open ahead of the final day of the trading week. Shares of Broadcom fall in extended hours trading, as an update from the chipmaker raises fresh worries over a spike in artificial intelligence investment. Costco’s financial results top forecasts, underlining strong demand for lower-priced items among economically wary Americans prior to the holiday shopping season. Lululemon Athletica announces the departure of its CEO, amid reports that its estranged founder is considering mounting a proxy fight. Crude prices advance, fueled by supply fears stemming from the potential U.S. interception of more Venezuelan oil tankers.

Futures mixed

U.S. stock futures hovered around both sides of the flatline on Friday, pointing to a muted end to a week that has featured key central bank interest rate decisions and crucial artificial intelligence sector earnings.

By 02:00 ET (07:00 GMT), the Dow futures contract had risen by 105 points, or 0.2%, S&P 500 futures were mostly unchanged, and Nasdaq 100 futures had dipped by 36 points, or 0.1%.

Both the benchmark S&P 500 and blue-chip Dow Jones Industrial Average notched fresh record closing highs on Thursday, buoyed by a Fed policy update which many interpreted as more balanced and less hawkish than initially anticipated. Analysts at Vital Knowledge suggested that Fed Chair Jerome Powell had shone a "green light" for a year-end equity market rally through the decision.

Still, sentiment was dented by a downbeat financial forecast from cloud-computing giant Oracle, which threatened to exacerbate already percolating worries around the sustainability -- and eventual profitability -- of the AI boom. Along with a more than 10% slide in Oracle’s stock price, the firm’s bonds were dumped and credit default swaps offering a hedge against a potential default were picked up, reflecting fears over its debt-powered AI ambitions.

Oracle’s dour outlook dragged down the tech-heavy Nasdaq Composite by 60.30 points, or 0.25%.

Broadcom flags impact from AI revenue on margins

Meanwhile, Broadcom shares slipped in extended hours trading, with the semiconductor titan and Nvidia rival flagging that its margins would fall because of the dilutive impact of its AI revenue.

Keen to chip away at Nvidia’s longstanding dominance in the race to build-out the processors underpinning the AI surge, Broadcom has thrust itself into the nascent technology. CEO Hock Tan told analysts in a post-earnings call that Broadcom’s backlog of business now stands at $73 billion, and expects to ship these items over the next year and a half.

But, in an increasingly familiar tech industry refrain, the push into AI has come with a massive price tag. These huge investments could squeeze profit margins at Broadcom, a fact that CFO Kirsten Spears acknowledged, saying that the company’s first-quarter consolidated gross margin will be down approximately 100 basis points sequentially.

Large U.S. cloud providers overall are anticipated to shell out more than $400 billion on AI this year, particularly on constructing the cutting-edge data centers needed to support AI models like OpenAI’s ChatGPT and Google’s Gemini.

Yet minimal evidence so far that the spending binge is leading to tangible gains in either productivity or earnings, along with frothy tech stock valuations and a series of circular dealmaking, has sparked warnings of a possible AI bubble.

Broadcom’s fiscal fourth-quarter results, which topped expectations, were one of the last major events on the AI calendar in 2025. Traders are now looking ahead to returns from Apple-supplier Jabil and semiconductor group Micron later this month.

Costco results top estimates

Elsewhere, shares of Costco ticked down marginally in after-hours trading, despite the budget warehouse retail chain posting fiscal first-quarter revenue and profit that topped estimates.

Same-store sales, excluding gas, also edged up by 6.4% in the quarter ended November 23, versus analysts’ expectations for an increase of 5.82%, according to LSEG data cited by Reuters.

Strength was derived as well from Costco’s partnership for same-day delivery with Instacart in the U.S. and UberEats and DoorDash in overseas markets.

Results from Costco, the retailer known for its large members-only locations and deals on bulk items, echo similarly robust numbers from peers like Walmart, Dollar Tree and Dollar General -- a trend that has highlighted how many consumers, especially in the U.S., are hunting for deals during a time of widespread economic uncertainty marked by a weakening jobs market and stubbornly elevated inflation.

Lululemon CEO to depart

Lululemon Athletica shares popped by more than 10% after-hours, following the athleisure group’s announcement of the departure of CEO Calvin McDonald and a heightened full-year profit forecast.

McDonald is set to leave in January without an immediate replacement, ending a seven-year term at the helm of the company known for its up-market athleisure clothing and leggings. He will remain on as a senior adviser through March, although he will let go of a board seat.

According to the Wall Street Journal, McDonald’s exit comes as the firm’s founder Chip Wilson has been taking steps in private to mount a proxy fight, meeting with potential investors and speaking with advisers.

Driving Wilson has partially been a frustration with Lululemon’s marketing strategy, the WSJ reported, adding it was not yet clear if McDonald’s departure will affect Wilson’s possible proxy battle.

Oil gains amid Venezuelan supply concerns

Oil prices rose Friday as the prospect of the U.S. intercepting more Venezuelan oil tankers deepened supply concerns.

Brent futures climbed 0.5% to $61.56 a barrel, and U.S. West Texas Intermediate crude futures rose 0.5% to $57.90 a barrel.

However, both benchmarks were on course for weekly declines, after dropping around 1.5% on Thursday, as a possible peace agreement between Russia and Ukraine would likely increase the supply of Russian oil into the global market.

Source: investing

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