Shares of chip maker, Broadcom (NASDAQ: AVGO) tumbled in pre-market trading on Thursday after a report in The Information that tech giant Google (GOOGL) has considered dropping the chip company as a supplier of AI chips as early as 2027.
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The report stated that Google had set a goal of dropping Broadcom earlier this year after a tussle between the two companies regarding the price the chip maker was asking for its chips. If Google goes ahead and does indeed drop AVGO, it plans to manufacture the chips in-house.
This could be a big blow for Broadcom even as the company’s management had stated recently that generative AI could make up more than 25% of the company’s semiconductor revenue next year.
In another development for Broadcom, South Korea’s Fair Trade Commission (FTC) has provisionally fined the company approximately $14.3 million for forcing a supply deal unfavorable to Samsung Electronics. The FTC’s investigation, prompted by Qualcomm’s complaint in 2021, revealed that in 2020, Broadcom imposed a burdensome long-term contract forcing Samsung to buy $760 million worth of chips from 2021 to 2023, with penalties for any shortfalls. The agreement was terminated in August 2021 due to its unfair terms.
Is Broadcom a Buy Sell or Hold?
Analysts are bullish about AVGO stock with a Strong Buy consensus rating based on 16 Buys and two Holds.