Broadcom Inc. (AVGO) shares are moving higher Monday after reports surfaced that the semiconductor giant is in talks with Microsoft (MSFT) about designing custom AI chips—a development that could reshape the competitive landscape in the AI hardware space.

What's Happening: According to The Information, Microsoft is discussing a partnership with Broadcom for future custom chip designs, which would involve redirecting business currently handled by Marvell Technology. The timing makes sense: tech giants are scrambling to lock down semiconductor capacity as AI products continue their explosive growth.

The same report highlighted that Marvell recently tried to secure more business from Meta Platforms by waiving part of an upfront engineering fee for chip design work. That particular chip is slated for a 2027 launch, suggesting these partnerships play out over multi-year timelines.

For Broadcom, the potential Microsoft deal represents a significant vote of confidence in its custom chip design capabilities—a lucrative business as hyperscalers build out AI infrastructure. The company is set to report quarterly earnings Thursday, December 12, after market close. Wall Street analysts are forecasting earnings per share of $1.86 on revenue of $17.49 billion.

Price Movement: At the time of writing, Broadcom shares were trading 2.19% higher at $398.79.