The sell-off in Broadcom shares tells a story of competition and risk. The underlying business tells a different one — about the invisible infrastructure that makes the AI boom possible at all.
Investors have spent the past week digesting a double dose of bad news. First came word that Google had expanded its custom AI chip partnership with Marvell Technology, a deal that could eventually be worth $12.2 billion. Then the Bank of America flagged potential exposure of up to $370 billion tied to Broadcom’s role as a guarantor on an AI infrastructure financing platform alongside Apollo and Blackstone. The shares have shed 14 percent over seven sessions, last changing hands at €311.85.
The Google Question Isn’t as Simple as It Looks
The Marvell announcement, which surfaced on a Wednesday, rattled a market that had long treated Broadcom as Google’s de facto exclusive partner for tensor processing units. Under the expanded arrangement, Google can acquire warrants on nearly 59 million Marvell shares at $206.58 apiece — roughly $12.2 billion in total — while Marvell develops an AI accelerator for Google under the project name “Frozen v2.”
RBC analysts put the scale of Google’s TPU procurement through Broadcom and MediaTek at $80 billion to $90 billion next year, a prize Marvell now hopes to share. Broadcom’s stock fell about 5 percent on Wall Street that day before staging a modest recovery in Thursday trading.
Yet the panic may be overwrought. Broadcom holds a long-term agreement with Google running through 2031, covering future generations of custom AI chips. A second supplier will certainly squeeze pricing and margins, but Broadcom’s position inside Google’s infrastructure remains entrenched. The company recently extended a similar partnership with Meta through 2029.
One industry analyst framed the Marvell deal as market expansion rather than displacement — a view that sits uneasily against the market’s immediate reaction but aligns with the broader trajectory of hyperscaler spending.
Where the Real Money Lives
The more compelling story sits outside the custom-chip spotlight entirely. Broadcom’s networking business — the switches and interconnects that tie thousands of GPUs together — is quietly becoming the company’s most durable advantage.
In the latest quarter, AI-related semiconductor revenue hit $10.8 billion, up 143 percent year over year. Nearly 40 percent of that came from networking components like the Tomahawk and Jericho switching chips. As Amazon, Meta and other hyperscalers build data centers on a multi-gigawatt scale, the bottleneck is shifting from raw compute to the connections between it. Broadcom’s dominance in high-speed Ethernet switches and PCIe interconnects makes it the plumber of the AI era — a position that holds even when customers choose a rival’s silicon.
Should investors sell immediately? Or is it worth buying Broadcom?
The financials back up the narrative. Second-quarter revenue for fiscal 2026 came in at $22.2 billion with net income of $9.3 billion, up 88 percent from a year earlier. Management has guided to $16 billion in AI semiconductor revenue for the third quarter.
The Financing Question
The BofA warning centers on Broadcom’s guarantee role in a platform with Apollo and Blackstone designed to back more than 20 gigawatts of data center capacity. The maximum risk from the first transaction is pegged at roughly $29 billion, with total exposure potentially reaching $370 billion by 2029.
That number has unnerved investors, even as the operational business hums along. The stock at one point traded nearly 21 percent below its 52-week high of €429.60 from June. The 14-day relative strength index sits at 34.4 — technically oversold — while the shares hover about 2.1 percent below their 200-day moving average of €318.60. On a twelve-month basis, the stock remains up 25 percent.
Software as a Shock Absorber
Beyond hardware, Broadcom’s software arm provides a stabilizing counterweight. Following the VMware acquisition, the company shifted to a subscription model built around VMware Cloud Foundation. Management expects third-quarter revenue of $8.9 billion, up 31 percent year over year, with gross margins around 90 percent.
That recurring cash flow funds the capital-intensive chip roadmap without external financing — a structural advantage few semiconductor peers can match.
The analyst consensus remains bullish, with a price target of $527.88, implying roughly 45 percent upside. Citi, Goldman Sachs and TD Cowen all carry buy ratings with targets between $500 and $525. Ahead of the September 2 earnings report, the street expects revenue of $29.25 billion and earnings per share of $3.21.
Market participants are split. ARK Investment Management used the weakness to add more than 55,000 shares, while insiders have sold several million dollars’ worth over recent months.
The September 2 print will test whether operational momentum can outweigh the twin concerns of competition and financing risk. For now, the correction looks less like a repricing of Broadcom’s fundamental role and more like a recalibration of expectations — one that leaves the company’s networking monopoly, and its 90 percent-margin software annuity, largely intact.
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