Why Broadcom Shares Came Under Pressure

Broadcom stock came under sharp selling pressure Wednesday after Marvell Technology announced a major agreement with Alphabet to develop custom semiconductors for artificial intelligence applications. Shares of Broadcom fell as much as 5.9% before recovering slightly, with the stock still down 4.4% late in the morning.

The immediate concern was straightforward: Google has historically been one of Broadcom’s most important customers, particularly through its work on Tensor Processing Units. News that Marvell would now participate in Google’s custom AI chip development therefore raised questions about whether Broadcom’s position could face increasing competition.

The market reaction illustrates how sensitive semiconductor valuations have become to changes in AI infrastructure spending. Even when a new agreement does not necessarily eliminate an existing supplier relationship, investors can quickly reassess future market share and revenue expectations.

Marvell’s Google Agreement Changes the Competitive Picture

Marvell’s regulatory filing revealed that the company will work with Google on custom AI semiconductors and supporting technologies, including inference accelerators, storage controllers, network interface controllers, memory interface controllers and near-memory computing.

The agreement also gives Google a warrant to purchase up to 58.97 million Marvell shares at $206.58 per share. The first portion will vest during the initial year, while the remaining shares are tied to future custom-product purchases through fiscal 2033.

That structure makes the agreement more than a conventional supplier contract. It creates a longer-term commercial relationship between Google and Marvell while giving the technology giant a potential equity stake in its supplier.

However, the announcement does not necessarily mean Broadcom is being displaced. Broadcom signed a five-year agreement with Alphabet earlier in 2026 covering future TPU development, along with networking and other components required for Google’s AI data centers. Marvell’s involvement could therefore reflect Google’s expanding demand for custom AI infrastructure rather than a direct replacement of Broadcom.

Broadcom’s AI Growth Story Remains Intact

The sharp selloff also needs to be viewed against Broadcom’s broader AI opportunity. CEO Hock Tan has said the company has a line of sight toward generating more than $100 billion in annual AI chip revenue by 2027. That figure would be substantially larger than Broadcom’s total revenue of $64 billion in 2025, highlighting how rapidly AI could reshape the company’s financial profile.

At roughly 31 times forward earnings, the stock is not inexpensive in absolute terms, but investors have been willing to assign premium valuations to semiconductor companies with strong exposure to AI infrastructure. The key question is whether Broadcom can convert its current customer relationships and custom-chip pipeline into the projected revenue growth.

Going forward, investors will likely focus on evidence that Google’s expanded supplier base complements rather than undermines Broadcom’s TPU business. The company’s ability to maintain major hyperscaler relationships, expand custom AI chip revenue and preserve margins will be critical. For now, Wednesday’s decline appears to reflect concerns about competitive positioning rather than definitive evidence that Broadcom’s Google business is being displaced.