Marvell Technology (MRVL) saw its stock decline following reports that Microsoft is evaluating a transition to Broadcom (AVGO) for custom silicon used in its cloud infrastructure. The potential shift threatens a critical revenue stream in the AI-driven data center market.
- Microsoft is reportedly considering replacing Marvell with Broadcom for custom AI chips in its cloud infrastructure.
- Marvell's 2024 revenue from Microsoft contracts totaled approximately $1.1 billion, or 15% of its total semiconductor sales.
- MRVL shares dropped 7.3% following the news, outpacing broader semiconductor market movements.
- Broadcom (AVGO) gained 1.2% on speculation of expanded cloud chip roles.
- The shift would impact Marvell's position in the high-growth AI and data center chip market.
- No official confirmation has been issued from Microsoft or Marvell regarding the transition.
Marvell Technology (MRVL) experienced a notable drop in share value after industry sources indicated Microsoft is considering replacing Marvell as a supplier of custom-designed chips for its cloud services. The move, if executed, would mark a significant strategic shift in Microsoft’s hardware supply chain, particularly as demand for AI-optimized data center chips accelerates. The development underscores growing competition in the custom silicon space, where Broadcom (AVGO) has emerged as a strong contender due to its vertically integrated design capabilities and expanding cloud partnerships. Marvell, which has relied heavily on Microsoft as a key client for its AI and networking chips, could face a material revenue disruption if the transition proceeds. While specific financial figures remain undisclosed, Marvell’s 2024 revenue from Microsoft-related contracts accounted for approximately 15% of its total semiconductor sales—amounting to nearly $1.1 billion annually. A full shift to Broadcom could erode this segment rapidly, especially as Microsoft’s Azure cloud platform continues to scale AI workloads requiring specialized silicon. The market reaction was immediate: MRVL’s shares fell 7.3% in early trading, outpacing broader semiconductor sector declines. Broadcom (AVGO) saw a modest 1.2% gain, reflecting investor speculation on potential upside. The potential reallocation could also influence other tech firms evaluating long-term chip partnerships, particularly in AI infrastructure.