Alphabet Inc.’s GOOGL Google is broadening its custom artificial intelligence (AI)-chip supply chain through a new partnership with AI networking chipmaker Marvell Technology, Inc. MRVL. The deal would strengthen the position of the latter, while raising concerns about Broadcom Inc.’s AVGO role as a major supplier.
So, now the key question is: does the deal make Marvell a better AI stock to buy than Broadcom? Let’s take a closer look –
Google’s Marvell Deal Challenges AVGO’s AI Chip Dominance
For quite some time, Alphabet-owned Google and other blue-chip companies have been developing custom AI chips to find more cost-effective alternatives to NVIDIA Corporation‘s NVDA advanced chips.
Alphabet’s Google has primarily collaborated with Broadcom to develop its custom chips. In April, Broadcom confirmed that it had extended its partnership with Google through 2031, under which it will provide the company with tensor processing units (TPUs) and networking equipment.
However, Google recently entered into a partnership with Marvell focused on TPUs, including accelerators, storage and network interface controllers. The Google AI chip deal allows Marvell to sell up to $12.2 billion in shares to Google.
The partnership and Google’s warrant expand Marvell’s hyperscaler customer base and bolster its long-term growth prospects. The strategic deal aligns Google’s interests with Marvell’s growth ambitions and establishes the latter as a key supplier of custom AI silicon to hyperscalers, a role the company has pursued for years.
But the deal with Marvell doesn’t mean that Google is moving away from Broadcom. It simply means Google is looking for more than one custom-chip partner. Still, the deal could reduce Broadcom’s share of Google’s future AI-chip spending, potentially weigh on its business and create a competitive challenge for the company.
After Google’s Deal, Is Marvell a Better Buy Than Broadcom?
Google’s partnership with Marvell to diversify its custom AI-chip supply chain has strengthened Marvell’s position as a key supplier of custom AI silicon to hyperscalers, while posing a competitive threat to Broadcom.
Broadcom remains heavily dependent on AI-related spending, and its relatively concentrated AI customer base could leave it vulnerable to a slowdown in AI infrastructure investment or weaker demand from hyperscalers.
Following the announcement, Broadcom’s share fell roughly 5% on Wednesday as investors remained concerned about its position with Google. On the other hand, Marvell’s shares jumped more than 9% as the deal has given the company a much larger role in the rapidly expanding AI-chip market.
