Where we stand on Broadcom after Marvell muscles in on its key customer Google

Broadcom shares fell 5% after Google, its flagship custom-chip customer, agreed to a broad partnership with Marvell Technology. Marvell said the arrangement spans custom-silicon programs attached to Google’s tensor processing unit (TPU) ecosystem, including memory and storage. Marvell shares rose about 7%, while the iShares Semiconductor ETF declined about 2%. The deal includes roughly $12.2 billion of Marvell stock warrants issued to Google, reinforcing concerns that Google may diversify suppliers, design more components internally, or work with Marvell and Taiwan’s MediaTek. Broadcom has co-designed Google TPUs for about a decade. The chip is now in its eighth generation, with Broadcom also serving as a key conduit to Taiwan Semiconductor Manufacturing Co. for fabrication. TPUs are AI accelerators, but complete AI-compute systems also require central processing units, networking, memory and storage, making coordination across these layers critical. Broadcom disclosed in April that it would develop and supply future TPU generations, networking and other components through 2031. CEO Hock Tan called the agreement “very, very strong” and financially substantial, while acknowledging that Google’s expanding AI consumption would likely create supplier diversity. The bear case therefore has merit, but Broadcom’s broader opportunity remains substantial. Its custom-silicon business has added OpenAI, Anthropic, Meta and Apple, reducing reliance on Google. Management expects $56 billion in AI-chip revenue this year and more than $100 billion in fiscal 2027. Broadcom would have preferred to win the Marvell business, but Tan is unlikely to issue warrants because they dilute shareholders. Advanced Micro Devices issued warrants to Meta and OpenAI in compute agreements to compete with Nvidia. Such arrangements can lift market capitalizations, leaving the long-term shareholder-value outcome uncertain. The Google-Marvell deal validates existing overhangs but does not destroy Broadcom’s thesis. Jim Cramer ranks Nvidia, Intel and Micron above Broadcom. Investors should also monitor inflation, Federal Reserve policy, oil prices, Treasury yields and political resistance to data-center construction. Walmart, Alibaba, Advance Auto Parts and Deere were scheduled to report, alongside jobless claims and the Philadelphia Fed Business Outlook.