Google planning to tie-up with MediaTek to develop next gen AI chips: Report

Google planning to tie-up with MediaTek to develop next gen AI chips: Report

  • 17.03.2025 15:11
  • livemint.com
  • Keywords: AI

Google is reportedly collaborating with MediaTek to develop next-generation AI chips, leveraging MediaTek's ties with TSMC and lower costs compared to Broadcom. Alphabet shares dipped slightly, while Broadcom saw a decline following the news. Intel's new CEO is also planning changes to its AI strategy.

Nvidia ReportsGOOGLsentiment_dissatisfied
open_in_newOriginal article

Estimated market influence

Google

Negativesentiment_dissatisfied
Analyst rating: N/A

Google's AI chips are key to its strategy, impacting services like Search and YouTube.

Alphabet

Alphabet

Negativesentiment_dissatisfied
Analyst rating: Buy

Shares of Alphabet dropped due to the MediaTek partnership report.

Context

Business Insights and Market Implications

Google and MediaTek Partnership

  • Google is reportedly planning to collaborate with MediaTek, a Taiwanese chipmaker, to develop next-generation AI chips (Tensor Processing Units - TPUs).
  • Reasons for partnership:
    • MediaTek’s strong relationship with TSMC (Taiwan Semiconductor Manufacturing Co.), a leading semiconductor manufacturer.
    • Lower cost per chip compared to Broadcom.
  • Expected timeline: AI chips to be produced by next year.

Financial and Market Impact

  • Alphabet (Google’s parent company) shares were trading at $166.81, down 0.48% on the day of the report.
  • Google spent between $6 billion and $9 billion on TPUs in 2024, according to a Reuters report citing Omdia.

Impact on Competitors

  • Broadcom: Shares dropped to as low as $187.50, down 0.9%, following the news of Google’s potential shift towards MediaTek.
  • Broadcom currently partners with Google for AI chip production, but the new tie-up could reduce reliance on Broadcom.

Intel's Strategic Shift

  • Intel’s incoming CEO, Lip-Bu Tan, is planning significant changes to the company’s chip manufacturing methods and AI strategies.
  • Intel shares gained over 7% on Nasdaq after the report, indicating investor confidence in the new leadership.

Market Implications

  • Semiconductor industry: The partnership highlights growing competition in AI chip development and production.
  • Strategic considerations: Google’s move to develop more AI chips in-house while relying on external partners for manufacturing reflects a broader trend of vertical integration in the tech sector.
  • Long-term effects: This could shift market dynamics, potentially reducing Broadcom’s dominance and increasing MediaTek’s share in the AI chip market.
  • Regulatory impacts: While not explicitly mentioned, such strategic shifts may attract regulatory scrutiny due to their potential impact on competition.

Competitive Dynamics

  • Google vs. Nvidia: Google aims to reduce reliance on Nvidia chips, which are currently dominant in the industry.
  • Intel’s overhaul: Intel’s new CEO’s focus on AI and chip manufacturing could position the company more competitively in the AI race.

Strategic Considerations for Stakeholders

  • Investors: The developments suggest opportunities in semiconductor manufacturing and AI technologies but also pose risks due to increased competition.
  • Customers: Improved AI chips could enhance performance of Google’s services like Search, YouTube, and Gemini AI models.