Alphabet-owned Google (NASDAQ:GOOGL) is considering dropping Broadcom (NASDAQ:AVGO) as a supplier of artificial intelligence (AI) chips, known as tensor processing units (TPUs), as early as 2027, according to a report published on Thursday. The move could save Google billions of dollars annually, as it continues to heavily invest in AI development, which is notably costlier than other types of computing.
This plan was reportedly set in motion earlier this year following a protracted standoff between the two companies over the price Broadcom was charging for the TPUs. If implemented, Google would fully design these chips in-house, marking a significant shift in its AI chip strategy.
The news sent Broadcom shares down 5% in premarket trading on Thursday. Broadcom CEO Hock Tan recently stated that generative AI could account for more than a quarter of the company's semiconductor revenue next year, indicating the potential impact of Google's decision on Broadcom's future business.
Google has been ramping up its investments in generative AI this year, following the launch of Microsoft-backed OpenAI's ChatGPT last year that took the tech world by storm. The decision to design TPUs in-house could further strengthen Google's position in the rapidly evolving AI sector.
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