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Investing.com -- Broadcom (NASDAQ: NASDAQ:AVGO) shares fell 1.3% amid news that Google (NASDAQ:GOOGL) may partner with MediaTek for the production of the next version of its Tensor Processing Units (TPUs), potentially diminishing Broadcom’s share in the lucrative AI chip market. While Broadcom has been Google’s exclusive partner for AI chips over the past nine years, the new arrangement with MediaTek, reported by The Information, could see Broadcom having to share the TPU business with a competitor.
The report indicates that Google’s decision to consider MediaTek stems from cost savings and the Taiwanese firm’s strong relationship with Taiwan Semiconductor Manufacturing Co. (TSMC), which manufactures the chips. Despite this development, Broadcom remains in discussions with Google to continue co-designing some of the AI chips. However, the prospect of shared business comes at a time when Broadcom has been publicly highlighting the potential billions in revenue from TPUs and custom AI chips in the coming years.
TPUs have been key to Google’s AI strategy, reducing its reliance on Nvidia (NASDAQ:NVDA) and providing a competitive edge as demand for AI capabilities skyrockets. Google’s investment in TPUs is significant, with spending estimated between $6 billion and $9 billion last year. Although Google may shift some of its chip orders to MediaTek, it remains one of Nvidia’s largest customers, renting out chips to cloud customers and utilizing them internally.
The move by Google reflects the intense competition and innovation in the AI chip industry, where companies like Nvidia and Google are vying for dominance with large language models and other AI applications. The potential change in Google’s partnership for TPU production underscores the dynamic nature of the tech industry’s supply chain relationships and the ongoing search for cost efficiencies and strategic advantages.
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