Broadcom's AI Growth Faces Uncertainty After Marvell-Google Deal

Broadcom's stock took a hit after Marvell Technology announced an expanded custom chip agreement with Google. The deal includes a warrant tied to as much as $120 billion of future purchases, and investors in Broadcom saw it as their problem.

The news wasn't entirely surprising, given that Google is deepening its relationship with Marvell. However, Broadcom has faced similar situations before, including when Apple planned to drop the company's Wi-Fi and Bluetooth combination chip by 2025.

In that instance, Apple eventually introduced its own N1 wireless chip in the iPhone 17 lineup, but it didn't mean losing the customer entirely. Apple continued to work with Broadcom on other projects, including a separate multiyear deal for 5G radio-frequency components.

Today, Broadcom's AI semiconductor revenue is driving growth, reaching $10.8 billion in its fiscal second quarter and guided to $16.0 billion in the third quarter. The concentration of Google's orders could touch the growth line investors are paying for, making it worth taking seriously at Broadcom's valuation.