Broadcom Corporation (NASDAQ:AVGO) shares tumbled on Thursday on the news that Google is considering severing ties with the semiconductor firm.
According to a report by The Information, executives at Google, owned by Alphabet Inc (NASDAQ:GOOG), have been in discussions about severing ties with Broadcom as a supplier of artificial intelligence (AI) chips as early as 2027.
Broadcom shares were down 6.8% in premarket trading on the Nasdaq.
If this plan moves forward, Google intends to handle the chip design in-house, specifically the tensor processing units, potentially resulting in substantial annual cost savings for the tech giant.
This strategic move by Google comes as part of its efforts to ramp up investments in chip development, competing fiercely with Microsoft for a dominant position in the flourishing market of generative AI applications. The reported discussions were prompted by a pricing dispute between Google and Broadcom concerning the TPU chips.
Moreover, Google is also planning to collaborate with chipmaker Marvell Technology to introduce an upgraded networking chip, internally referred to as Granite Redux, by the next year.
Shares of Marvell were up 3.4% on Thursday morning.