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Broadcom falls on report Google may work with MediaTek on AI

Broadcom falls on report Google may work with MediaTek on AI

  • 17.03.2025 23:04
  • investing.com
  • Keywords: AI, Market

Broadcom shares dropped at the open after reports Google is exploring a partnership with MediaTek for AI chip production, potentially reducing Broadcom's exclusive role. The move could signal a shift in Google's strategy to develop more in-house AI chips while maintaining ties with Broadcom and MediaTek for production.

Alphabet ReportsAVGOsentiment_dissatisfiedNVDAsentiment_neutral

Estimated market influence

Broadcom

Broadcom

Negativesentiment_dissatisfied
Analyst rating: Strong buy

Shares dropped due to potential loss of exclusive AI chip partnership with Google.

Google

Positivesentiment_satisfied
Analyst rating: N/A

Exploring partnership with MediaTek for AI chips, which may reduce reliance on Broadcom.

MediaTek

Positivesentiment_satisfied
Analyst rating: N/A

Potential new partner for Google's AI chip production, offering lower costs and strong TSMC ties.

Nvidia

Nvidia

Neutralsentiment_neutral
Analyst rating: Strong buy

Google is a major customer, but not directly affected by the partnership change.

Taiwan Semiconductor Manufacturing Co. (TSMC)

Neutralsentiment_neutral
Analyst rating: N/A

Existing partner with MediaTek; no direct impact mentioned in the article.

Context

Analysis of Broadcom's Stock Drop Due to Google-MediaTek Collaboration Report

  • Stock Performance:

    • Broadcom (AVGO) shares dropped at the open on Monday, reaching a low of $187.50 before recovering slightly to $193.82, down 0.9%.

  • Report Details:

    • Google is reportedly exploring a partnership with MediaTek for designing and producing Tensor Processing Units (TPUs), potentially reducing Broadcom’s exclusive role in supplying AI chips.
    • The collaboration is expected to focus on the next generation of TPUs, which will be produced next year.

  • Current Relationship Status:

    • While Google may work with MediaTek, it does not mean a complete severance from Broadcom. Both companies are still in talks for co-designing some TPU chips.

  • Reason Behind the Shift:

    • Pricing disputes with Broadcom have influenced Google’s decision to explore alternatives.
    • MediaTek offers lower costs per chip and has a strong relationship with Taiwan Semiconductor Manufacturing Co. (TSMC), which produces TPUs.

  • Google's AI Chip Strategy:

    • Google’s TPU chips are critical for its AI strategy, powering internal AI research, cloud computing, and services like Google Search, YouTube, and Gemini AI models.
    • The company spent an estimated $6 billion to $9 billion on TPUs last year.

  • Dependency on External Partners:

    • Despite efforts to develop more AI chips in-house, Google is expected to continue relying on external partners like Broadcom and MediaTek for chip production, packaging, and quality testing.

  • Market Implications:

    • The potential collaboration could intensify competition in the AI chip market, impacting pricing and innovation dynamics.
    • Investors may view this as a long-term risk for Broadcom’s revenue streams tied to Google.

  • Strategic Considerations:

    • Google’s move reflects its strategy to diversify supply chain risks and potentially reduce costs while maintaining control over critical AI infrastructure.
    • MediaTek’s involvement could position it as a stronger competitor in the AI chip market, challenging Broadcom and other players like Nvidia.

  • Long-Term Effects:

    • The partnership may lead to shifts in market share and pricing in the AI chip industry.
    • Broadcom faces increased pressure to maintain its competitive edge in Google’s supply chain.