TLDR
- Broadcom fell roughly 5% after Marvell announced a deal to develop custom AI chips for Google, including a warrant worth up to $12.2 billion.
- Broadcom still holds a long-term agreement with Google through 2031 to supply custom AI chips.
- Broadcom’s AI revenue hit $10.8 billion in Q2 FY2026, up 143% year over year.
- Year to date, AVGO is up just 10%, trailing AMD (+126%), MRVL (+155%), and NVDA (+18%).
- VMware security concerns and off-balance-sheet financing worries are adding to selling pressure.
Broadcom (AVGO) opened down roughly 5% on Wednesday to $359.66 after Marvell Technology announced a deal to develop custom AI chips for Google, with Alphabet receiving a warrant to buy up to $12.2 billion worth of Marvell stock.
Marvell jumped more than 11% to $240.26 on the news. Alphabet edged down 0.7% to $341.96. Broadcom closed Tuesday at $380 before the sell-off.
The deal raised fresh questions about how exclusive Broadcom’s relationship with Google really is. Broadcom has been Google’s primary custom chip partner, playing a key role in the design of Google’s Tensor Processing Units.
In April, Broadcom signed a long-term agreement with Google to develop and supply custom AI chips and components for Google’s next-generation AI racks through 2031. That deal made Broadcom one of the most important custom silicon partners in the AI infrastructure space.
Marvell’s new foothold at Google threatens the exclusivity of that arrangement. The new deal covers AI inference accelerators, storage, networking, memory interface controllers, and near-memory computing technologies.
AI Revenue Still Growing Fast
Broadcom’s numbers are not the problem. In Q2 FY2026, total revenue rose 48% year over year to $15 billion. AI revenue more than doubled to $10.8 billion, up 143% year over year.
The company has a $73 billion AI backlog covering XPUs, switches, digital signal processors, and optical components, with deliveries expected over the next 18 months.
CEO Hock Tan has said AI revenue is expected to hit $16 billion in the current quarter. Broadcom’s six core custom chip customers include Google, Meta, Anthropic, and OpenAI.
Google’s planned capital expenditure of $175 billion to $185 billion for 2026 still represents a large pipeline for Broadcom. And Big Tech as a whole is expected to spend more than $700 billion on AI infrastructure this year, up from roughly $400 billion last year.
Stock Lags Behind Chip Peers
Despite the strong operational results, Broadcom’s stock has not kept pace with chip peers. AVGO is up just 10% year to date through Tuesday’s close.
AMD is up 126% year to date. MRVL has gained 155%. NVDA is up 18%. Even the iShares Semiconductor ETF (SOXX), which holds Broadcom, is up 77% year to date and is down just 0.7% Wednesday to $527.59.
That gap between Broadcom’s operational performance and its stock price is the central tension in Wednesday’s trading.
Two additional issues are adding to the pressure. Traders on Stocktwits have flagged concerns about Broadcom’s off-balance-sheet financing vehicles and reported VMware security issues.
A Wall Street Journal report from August 17 noted that nine top tech companies carry roughly $3 trillion in off-balance-sheet commitments, mostly tied to AI, with those obligations growing faster than traditional capital expenditure.
Broadcom is scheduled to report third-quarter results next month.
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