Breaking away from NVIDIA too? Reports: Microsoft in talks with Broadcom for custom chips

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Microsoft is negotiating with Broadcom to design future custom chips, a move that could mean Microsoft will shift related business from its existing supplier Marvell to Broadcom. This highlights tech giants' accelerated strategy to reduce dependence on Nvidia amid the artificial intelligence boom.

On December 5, according to tech media The Information, a person involved in the discussions revealed that Microsoft and Broadcom are in talks over custom chip design. If the partnership is reached, Broadcom will replace Marvell as Microsoft’s new partner in the custom chip sector.

The report says this potential deal comes as major tech companies race to acquire more semiconductors to expand their AI product lines.

Broadcom is viewed as the most capable challenger to Nvidia’s dominance in the semiconductor market. The company’s strategy in custom chips is closely connected to CEO Hock Tan’s preference for large deals and decisive management style.

This negotiation reflects intensifying competition in the custom chip market, as chipmakers actively vie for orders from tech giants.

Surging demand for custom chips

The report notes that as companies like Microsoft accelerate AI product development, demand for custom chips is soaring. Nvidia currently dominates the semiconductor market, but tech companies are seeking diversified chip supply chains to reduce reliance on a single supplier.

Custom chips can be optimized for specific AI workloads, providing tech firms with performance and cost advantages. This is prompting giants like Microsoft and Meta to increase investment in custom chip development. According to three people involved in development, Meta plans to launch such a chip in 2027.

The report also points out that this collaboration reflects intensifying competition in the custom chip market. Two people involved in negotiations revealed that Marvell has recently adopted a strategy of waiving some upfront engineering design fees in order to win more business from Meta.

Leveraging its technical strength and scale, Broadcom is striving for a larger share in this competition. The company is seen by the market as the primary competitor capable of challenging Nvidia.

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