December 12, 2025 Tech Sell-Off (AVGO, ORCL) & Market Reaction to FOMC Rate Cut

This analysis is based on a December 12, 2025 Schwab Network segment [6] covering two interconnected market events: a tech sector sell-off led by Broadcom (AVGO) and Oracle (ORCL), and the market’s reaction to the FOMC’s December 10 interest rate decision.

The tech sell-off was driven by two company-specific developments:

1. Broadcom (AVGO)
   : Disappointing sales outlook (despite beating earnings estimates) due to underwhelming AI order backlogs, reigniting concerns about potential overvaluation in the AI sector [2][3].
2. Oracle (ORCL)
   : A delay in the completion of data centers for OpenAI from 2027 to 2028 (citing labor and material shortages), which followed the company’s recent softer-than-expected quarterly results [4].

The FOMC context amplified market volatility. On December 10, the committee announced a third consecutive 25-basis-point rate cut, reducing the federal funds rate to 3.5–3.75%. The decision passed with a narrow 9–3 vote, with three dissenters (including Goolsbee and Schmid) advocating for more patience. Critically, the Fed projected only one additional rate cut in 2026, diverging from some market expectations [1][5].

Market performance reflected these dynamics: the tech sector fell 1.69% [0], with AVGO dropping 5.27% on volume of 93.22M and ORCL declining 3.26% on volume of 54.76M [0]. The tech-heavy NASDAQ Composite fell 1.25%, outpacing losses in the S&P 500 (-0.86%) and Dow Jones Industrial Average (-0.53%) [0]. Investors rotated into value sectors, with Basic Materials rising 1.59955% [0].

1. AI Sector Valuation Vulnerability
   : The sell-off highlights a disconnect between investor expectations and actual fundamentals in AI-focused stocks. Broadcom’s underwhelming AI backlogs and Oracle’s project delays signal that the AI boom may be facing near-term growth headwinds [2][3][4].
2. FOMC Policy Divergence
   : The narrow vote and conservative 2026 rate cut projection reveal divided committee views on inflation and labor market risks. This divide could increase market sensitivity to future Fed communications, leading to heightened volatility [1][5].
3. Growth-to-Value Rotation
   : The shift from tech (growth) to Basic Materials (value) indicates investors reallocating to sectors perceived as more resilient amid policy uncertainty and growth concerns [0].

• AI Sector Volatility
  : Continued underperformance from AI-focused companies could trigger broader declines in the tech sector, particularly if valuations remain disconnected from fundamentals [2][3][4].
• Fed Policy Uncertainty
  : The divided FOMC vote raises the risk of sudden policy shifts, which could create market instability [1][5].
• Supply Chain Constraints
  : Oracle’s data center delay underscores ongoing labor and material shortages that may disrupt tech infrastructure projects and revenue timelines for related companies [4].

• Value Sector Momentum
  : The rotation into Basic Materials (and potentially other value sectors) presents opportunities for investors focused on defensive or undervalued assets [0].
• Long-Term Rate Cut Benefits
  : The Fed’s rate cuts may support economic growth over time, benefiting interest-sensitive sectors and companies [1][5].

• Event
  : December 12, 2025 tech sell-off (led by AVGO and ORCL) and market reaction to the FOMC’s December 10 rate cut decision.
• Tech Sell-Off Drivers
  : AVGO’s weak sales outlook (AI backlog), ORCL’s OpenAI data center delay.
• FOMC Decision Details
  : 25 bps rate cut (3rd consecutive), 3 dissenters, 1 projected rate cut in 2026.
• Market Performance
  : Tech sector (-1.69%), AVGO (-5.27%), ORCL (-3.26%), NASDAQ (-1.25%), Basic Materials (+1.6%).
• Key Trends
  : Growth-to-value rotation, AI sector valuation concerns, FOMC policy divergence.