Semiconductor design company Marvell Technology (MRVL) disclosed on August 19 that it had expanded its custom chip cooperation agreement with Google, and that the agreement includes a warrant related to future procurement of up to $120 billion. This news quickly affected Broadcom (AVGO). The logic behind the market sell-off is that Google, one of the most important customers of Broadcom’s custom AI chip business, is deepening its cooperation with Marvell, a major competitor of Broadcom.
This is not the first time Broadcom has faced panic over a major customer potentially pursuing “de-Broadcomization.” In January 2023, reports emerged that Apple planned to abandon Broadcom’s Wi-Fi and Bluetooth combo chips by 2025 and switch to self-developed products. At that time, Apple accounted for approximately 20% of Broadcom’s annual revenue, a substantial amount. Although this replacement ultimately occurred nearly three years later, during that period, Apple announced another multi-year, multi-billion-dollar agreement with Broadcom regarding 5G RF components, and last month extended this supply relationship through 2031. During this time, driven by the surge in AI demand, Broadcom’s total revenue grew from $35.8 billion in fiscal 2023 to $63.9 billion in fiscal 2025, and its stock price has risen over 500% since the date of the report.
Historical experience suggests that the impact of such design replacements takes years to fully materialize, and the timeline for executing the Google-Marvel agreement also extends to 2033. However, this current situation has a fundamental difference from the Apple incident. At that time, the business at risk of replacement was the mature and peripheral wireless components segment, whereas the current core risk for Broadcom lies in its high-growth custom AI chip business, which is driving its rapid expansion. In the second fiscal quarter ended May 2026, Broadcom’s AI semiconductor revenue reached $10.8 billion, up 143% year-over-year, and the company expects continued significant growth in the next fiscal quarter. Broadcom does not disclose Google’s specific revenue contribution, but its top five customers account for approximately 40% of total net revenue. Any change in orders from Google would directly impact the company’s most critical growth engine. With a current price-to-earnings ratio of approximately 60 times and a stock price that has fallen 27% from its peak, this customer concentration risk cannot be ignored.
Meanwhile, the bond market has begun to reassess the potential credit risk Broadcom bears due to its support for AI chip financing. Because Broadcom provides guarantees or credit support for multiple large-scale AI chip financing transactions, its corporate bond yields and credit default swap (CDS) prices have risen noticeably in recent periods. Data shows that its corporate bonds maturing in 2031 have seen yields increase since August, and the five-year CDS price has risen more than those of Oracle and SpaceX. Market concerns center on Broadcom’s participation in a massive AI infrastructure financing plan exceeding $60 billion, in which it may provide credit guarantees. Such off-balance-sheet items, including long-term lease contracts, purchase commitments, and equipment residual value guarantees, constitute substantial “hidden leverage.” Should a downturn in the AI industry prevent customers from fulfilling their obligations, Broadcom would face not only damage to its own earnings but also substantial potential payment liabilities. The bond market’s reaction indicates that credit investors have begun demanding higher risk compensation to address the balance sheet risks that Broadcom has increasingly taken on to drive AI chip sales.
