Microsoft Sparks AI Chip Battle — Talks With Broadcom on Custom Silicon

This article first appeared on GuruFocus.

Microsoft (NASDAQ:MSFT) is in talks with Broadcom (NASDAQ:AVGO) to co-design custom chips for artificial intelligence workloads, according to a Saturday report by The Information.

The discussions mark a shift after Microsoft had previously worked with Marvell (NASDAQ:MRVL) for some semiconductors. The move reflects growing demand for tailored silicon as cloud and AI competition heats up.

People familiar with the talks told the outlet the possible deal would focus on accelerators optimized for large language models and data-center inference. Microsoft and Broadcom did not immediately respond to requests for comment.

Analysts say partnerships with established chipmakers could speed deployment of Microsoft’s AI services by cutting reliance on third-party supply chains. Broadcom’s scale in networking and chip design may offer engineering advantages, they added.

Any agreement would still face engineering, commercial and regulatory hurdles. Terms, timeline and whether designs would be proprietary to Microsoft were not disclosed.

The talks underscore how hyperscalers are moving deeper into custom silicon to control costs and performance.