Broadcom Inc. (AVGO) shares held relatively steady Tuesday morning, but don't let the calm fool you. Fresh AI chip headlines suggest the company might be sitting on a much bigger opportunity than the market realizes right now.
What's Happening: According to The Information, Meta Platforms is exploring the use of Google's custom tensor processing units for its data centers starting in 2027, with the possibility of renting these chips from Google Cloud even sooner. That might sound like a story about Meta and Google, but here's the twist: Broadcom is Google's key silicon partner on these TPUs.
If Meta moves forward with large-scale TPU adoption, Broadcom stands to benefit from higher custom-chip revenue with better multi-year visibility. Because TPUs are customized rather than off-the-shelf products, Broadcom can capture fatter margins than it would on commodity networking chips. Plus, design wins like this tend to lock in multi-year production cycles tied to cloud capital expenditure plans.
The Bigger Picture: This potential Google-Meta TPU arrangement illustrates something important: hyperscalers want to diversify their chip suppliers and reduce their reliance on Nvidia. That strategy fits perfectly with what Broadcom does best, designing application-specific accelerators and networking equipment that integrate seamlessly into cloud providers' infrastructure.
The macro environment is helping too. Expectations for a possible Federal Reserve rate cut in December are generally improving risk appetite for mega-cap tech and semiconductor stocks, which supports continued heavy spending on AI infrastructure.
Jim Cramer weighed in Tuesday, calling Broadcom the most likely winner if a Google-Meta TPU agreement materializes. These developments collectively highlight Broadcom's central position in next-generation AI data centers, even as the stock takes a breather after a strong rally.
Performance Snapshot: Broadcom's Momentum score sits at an exceptional 94.56, according to market data rankings.
AVGO Price Action: Broadcom shares were down 0.73% at $375.42 at the time of publication Tuesday. The stock is trading near its 52-week high of $386.48, according to market data.
