Cramer: Google wants to replace Broadcom as AI chips supplier is a ‘patently false’ story

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Written on Sep 21, 2023

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Google is reportedly considering replacing Broadcom as its AI chips supplier.
Jim Cramer commented on The Information report today on CNBC.
Broadcom shares lost as much as 4.0% following the report on Thursday.

Alphabet Inc’s Google (NASDAQ: GOOGL) is reportedly considering replacing Broadcom Inc (NASDAQ: AVGO) as its supplier of AI chips by 2027.

Why would Google want to replace Broadcom?

An anonymous source told “The Information” today that Google may switch to its own in-house chips following a deadlock with Broadcom over price of the Tensor Processing Units (TPUs).

Such a move could potentially cut its annual costs by billions of dollars, the reported added. The tech behemoth also decided in favour of reducing the number of employees on its hiring team to lower costs last week (find out more).

Google also wants to shift to Marvell Technology from Broadcom for data centre chips, as per The Information. None of the three companies have officially responded to the report on Thursday.

Cramer reacts to The Information’s report

Earlier this year, experts at JPMorgan had forecast that Broadcom will generate $3.0 billion from Google in 2023 after the latter accelerated orders for its TPUs.

On CNBC’s “Squawk on the Street”, famed investor and Mad Money host Jim Cramer whose Charitable Trust owns “AVGO” also said that the report this morning was “patently false”.

I believe the story that came out in The Information is patently false. The relationship is deep, multiple year. I think that they are actually good strategic partners, total cost of ownership is good.

The news arrives months after Hock Tan – the Chief Executive of Broadcom said artificial intelligence could make up over 25% of semiconductor revenue of the company in 2024.