Broadcom Has Seen Its Biggest Customer Drop a Key Chip Before. History Says What the Stock Did Next.

AVGO dropped approximately 5% on August 19 after MRVL announced an expanded custom chip agreement with GOOG, Broadcom's largest AI customer. The selloff echoes concerns about customer concentration risk in Broadcom's AI semiconductor business.

Historical precedent offers context but limited comfort. When AAPL dropped a Broadcom wireless chip in 2023, AVGO stock eventually gained over 500% and revenue nearly doubled as AI demand offset the loss. That transition proved slow and partial, cushioning the impact.

The current situation carries higher stakes. Google's custom chip orders sit at the core of Broadcom's AI growth narrative, not a peripheral wireless component. The shift directly threatens the segment driving current valuations, making concentration risk more acute than the Apple episode.

MRVL's expanded partnership signals Google is diversifying its custom silicon suppliers, potentially reducing Broadcom's share of a key revenue stream at a time when the stock's multiple reflects continued AI dominance.