Broadcom follows up on report that Google discussed leaving the company as an AI chip supplier

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A smartphone with the Broadcom logo displayed is placed on a computer motherboard in this illustration taken March 6, 2023. Reuters/Dado Ruvik/Illustration/File Photo Get licensing rights

Sept 21 (Reuters) – Broadcom (AVGO.O) fell as much as 4.3% on Thursday after The Information reported Google executives had discussed leaving the company as a supplier of artificial intelligence chips as early as 2027.

The report, citing a source, said Alphabet-owned (GOOGL.O) Google would design the chips in-house – called tensor processing units – if it goes ahead with the plan, potentially This will save the tech giant billions of dollars in costs annually.

Google is increasing chip investments this year as it competes with Microsoft (MSFT.O) for dominance over the fast-growing market for generative AI applications like ChatGPT.

The report said Google’s discussions follow a standoff between the company and Broadcom over the price of TPU chips.

It said Google is also working to replace Broadcom with Marvell Technology (MRVL.O) as the supplier of chips that connect servers to Ethernet switches in its data centers.

Broadcom and Google did not immediately respond to Reuters requests for comment. Marvel declined to comment.

Marvell shares pared gains and fell slightly.

Broadcom is seen as the second-biggest winner from the generic AI boom after Nvidia (NVDA.O). CEO Hock Tan predicted in June that the technology could account for more than a quarter of the company’s semiconductor revenue next year.

In May, JPMorgan analysts estimated that Broadcom could receive $3 billion in revenue from Google this year following a “recent order acceleration” by the company for its TPU processors.

Google co-designs its AI chips with Broadcom and the tech giant has already roped in the semiconductor firm for its sixth-generation processors, analysts said. He said Broadcom also works with Meta Platform (META.O) on the social media giant’s custom chips.

Big technology companies from Microsoft to (AMZN.O) have in recent years turned to developing custom chips that help them save costs and are better suited for their specific workloads.

The push has intensified this year after the price of Nvidia’s H100, the chip that powers most generative AI apps, increased, almost doubling from its original cost of $20,000.

Reporting by Kanjik Ghosh and Aditya Soni in Bengaluru; Editing by Savio D’Souza, Nivedita Bhattacharjee and Krishna Chandra Elluri

Our Standards: The Thomson Reuters Trust Principles.

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