Google reportedly looking to drop chip-provider Broadcom by 2027

According to a report by Reuters, Google (GOOG, GOOGL) may drop Broadcom (AVGO) as their supplier of AI chips by 2027. The report details that Google could design the chips — called tensor processing units — in-house, potentially saving the company billions. Shares of Broadcom dipped in the morning trading session on the news.

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Video transcript

BRAD SMITH: Broadcom is where we start things off. Those shares are certainly in focus among investors. As according to a report this morning, Google has discussed dropping the company as their supplier of AI chips as early as 2027. Now, that's from Reuters. Reportedly, Google plans on designing the chips in-house. This comes after a months long standoff between the two companies over Broadcom's price for the chip.

You're taking a look at Broadcom shares this morning. AVGO is the ticker symbol there. The shares are down by about 3 and 1/2% under pressure as a major partner or a major historical deal that the two companies have had in place. Certainly, any kind of deterioration of that relationship would have a direct impact to the financial results of a company like Broadcom here.

SEANA SMITH: Yeah, Brad, you're exactly right there. And it could obviously potentially-- if this, in fact, report is true and does come to fruition, it could slow growth there at Broadcom. It could essentially cost the company billions down the. Line we know that this is such an important relationship for Broadcom when you take into account the business that Google has been giving the company as their AI chip supplier.

If we do see the two break apart, the question is, who is Google going to turn to in the interim, right? We are seeing some movement in Marvell Technology. And the information reporting there that Google could potentially be working on a move to move to Marvell Technology for the chips that are connecting services to the ethernet switches. So we'll see whether or not that happens.

I also thought that part of the report-- the fact that we could eventually see Google try to build something in-house, obviously, similar-esque to what we've heard from apple trying to bring their chip production in-house, exactly what that means. And the timeline of that, obviously lots of questions there.

BRAD SMITH: Certainly.