Broadcom Bets Big on AI Chips as Google Diversifies Suppliers

The latest:

Broadcom’s AI franchise, projected to generate $100 billion in revenue next fiscal year, is heading into an earnings report clouded by new competition from Google’s other chip partners, the Wall Street Journal reported. The company’s shares have gained 6% this year while the PHLX Semiconductor Index rose 60%, a gap the Journal attributes to competitive and technical pressures building around its custom-silicon strategy.

Details:

• The concentration: AI chips accounted for about 44% of Broadcom’s revenue in the first fiscal quarter of 2026, the first time the company broke out that figure. Analyst forecasts cited by the Journal put that share at 70% within the next year, sharply narrowing the diversification that once made the stock a broader semiconductor play.
• How it started: Broadcom had been co-developing tensor processing units with Google before the AI boom. When Microsoft began adding AI to Bing, Google saw a threat to its core advertising business and ordered as many AI chips as it could, according to the Journal, launching Broadcom into the center of the boom.
• The customer roster: Custom AI-chip development deals with Meta Platforms and OpenAI followed the Google work, while the Google business itself expanded. The Journal said Broadcom’s position rested on doing something Nvidia’s general-purpose AI accelerators could not deliver for specific workloads.
• Google diversifies: Broadcom was once Google’s sole TPU design partner, but Google has since brought in Taiwan’s MediaTek. Google also signed a long-term agreement with Marvell Technology for networking and other custom chips, a deal Marvell said could produce roughly $120 billion in revenue through its 2033 fiscal year.
• The technical risk: Because Broadcom’s chips are customized for specific computing tasks, the Journal noted, they and their underlying designs would be difficult to transfer if one of its custom-chip customers falters — a vulnerability that sharpens as the spending capacity of even the healthiest technology companies gets stretched.
• The valuation: Broadcom trades at roughly 20 times forward earnings, above the PHLX Semiconductor Index average of 19 times and Nvidia’s multiple of about 17 times, leaving little discount despite the year’s underperformance.
• The backdrop: The global bond selloff continued Wednesday, with 10-year yields rising in Japan, Germany and the U.K. U.S. index futures pointed lower, with the E-Mini Nasdaq 100 contract down 0.40% at 29,008.75 and the 10-year Treasury yield at 4.80%.
• Other movers: GitLab shares jumped premarket after second-quarter revenue and earnings beat expectations, and Dell Technologies rose 9% on server demand. Volvo Car fell in Stockholm after reporting lower global sales for the three months through August versus the prior quarter.
• Turbine shock: Howmet Aerospace shares fell more than 7% Monday, partly rebounding Tuesday, after Elon Musk signaled plans to make his own power-turbine components. Howmet and Berkshire Hathaway’s Precision Castparts dominate the market; smaller supplier DPC also declined.

Background:

Broadcom entered the AI boom as a mix of chip and software businesses assembled by Chief Executive Hock Tan. Growth was modest by AI-era standards, but the units carried high profit margins that Tan pushed to widen further.

Between the lines:

The Journal’s reading is that Broadcom’s core advantage and its core risk are the same design choice. Chips built for one customer’s workload beat general-purpose silicon on that job, but cannot be resold elsewhere if the buyer pulls back. Google’s move to MediaTek and Marvell shows the largest customer already reducing dependence, just as AI approaches 70% of revenue.

What’s next

Broadcom reports fiscal results later Wednesday, with attention on AI-segment revenue guidance toward the projected $100 billion and any update on the TPU relationship with Google.