The AI chip market is splitting in two.
While everyone watches Nvidia, the real story is happening one layer deeper.
Google, Meta, and OpenAI are all building their own AI chips now.
And they're all working with the same partner: Broadcom.
Three of the biggest AI players in the world. One semiconductor partner.
The Shift Nobody's Talking About
Here's what's happening.
The hyperscalers realized something: buying off-the-shelf GPUs from Nvidia $NVDA ( ▼ 3.65% ) works, but it's expensive.
Custom chips solve that problem.
OpenAI just signed a multibillion-dollar deal with Broadcom $AVGO ( ▼ 0.94% ) to develop 10 gigawatts worth of custom AI accelerators.
Google $GOOGL ( ▲ 0.16% ) made this move years ago. Its TPUs run most of its AI infrastructure today.
Meta's $META ( ▼ 2.68% ) second-generation MTIA chips? Built with Broadcom's expertise.
When you design a chip for your exact workload, you can strip out what you don't need and double down on what matters. The result is better performance per watt, lower operating costs, and independence from a single supplier.
"OpenAI taps Broadcom to build its first AI processor in the latest chip deal," Reuters reported. That's a company that was Nvidia's biggest customer now building its own silicon.
Which company's custom chip strategy is the most promising?
The pattern is clear. If you're spending billions on compute, you're going to want chips built for your needs.
Why Broadcom Wins
Broadcom $AVGO ( ▼ 0.94% ) doesn't manufacture chips. It designs them.
Specifically, it designs ASICs, chips purpose-built for one task, which is exactly what AI companies need.
The tech advantage is real.
Broadcom handles the architecture, design, and tape-out. Then a foundry like TSMC manufactures it. The AI company owns the IP. Broadcom gets paid for engineering services and volume production.
"Broadcom's ASIC model lets companies rapidly design, customize, and deploy specialized chips at scale," QMoat notes.
Speed matters here.
These companies can't wait three years for a chip to reach the market.
Broadcom's infrastructure lets them go from concept to production faster than building in-house.
Numbers Behind the Movement
The OpenAI deal alone is worth multiple billions.
That's just one contract. Google's TPU program represents ongoing revenue across multiple chip generations. Meta's MTIA project adds another revenue stream.
"OpenAI and Broadcom announce strategic collaboration to deploy 10 gigawatts of OpenAI-designed AI accelerators," according to Broadcom's official release.
10 gigawatts of compute infrastructure requires massive chip volume.
That translates to years of production runs and steady cash flow.
The custom AI chip market is growing faster than the overall semiconductor market.
This partnership underscores Broadcom's unique position in the ecosystem of custom accelerators as tech giants seek alternatives to Nvidia.
Alternatives to Nvidia. That's the key phrase.
What This Means
Once you've built five generations of chips with a partner, switching becomes almost impossible.
The integration is too deep.
For you, this creates a different risk profile than Nvidia $NVDA ( ▼ 3.65% ) .
Nvidia's revenue depends on continued AI spending growth.
Broadcom's $AVGO ( ▼ 0.94% ) custom chip business depends on a handful of massive, multi-year contracts with customers who have strong incentives to keep building their own silicon.
The competition isn't standing still.
Intel $INTC ( ▼ 2.97% ) is pushing its foundry services for custom AI chips. $AMD ( ▼ 7.27% ) has semi-custom chip experience from game consoles. $TSMCF ( ▼ 11.93% ) is building relationships directly with hyperscalers.
But right now, Broadcom has the advantage. It has the partnerships, the proven track record, and the capacity to handle billion-dollar programs.
The shift from general-purpose to custom AI chips isn't coming. It's already here.
Broadcom is the company turning that shift into revenue.
|