• Broadcom's CEO says he's too busy riding the AI wave to consider a takeover of rival Intel.
• In an interview with the Financial Times, Hock Tan said he had no interest in "hostile takeovers."
• Broadcom has soared to a $1 trillion market capitalization for the first time thanks to the AI boom.

The chief executive of $1 trillion AI chip giant Broadcom has dismissed the prospect of a takeover bid for struggling rival Intel.

In an interview with the Financial Times, Hock Tan said that he has his "hands very full" from riding the AI boom, responding to rumors that his company could make a move for its Silicon Valley rival.

"That is driving a lot of my resources, a lot of my focus," Tan said, adding that he has "not been asked" to bid on Intel.

The Broadcom boss is also adopting a "no hostile takeovers" policy after Donald Trump blocked his company's offer for Qualcomm in 2018 on national security grounds. Broadcom was incorporated in Singapore at the time.

"I can only make a deal if it's actionable," Tan told the FT. "Actionability means someone comes and asks me. Ever since Qualcomm, I learned one thing: no hostile offers."

Broadcom and Intel have experienced diverging fortunes since the start of the generative AI boom. Broadcom has more than doubled in value since the start of the year to hit a $1 trillion market capitalization for the first time, while Intel has collapsed by more than half to $82 billion.

Broadcom, which designs custom AI chips and components for data centers, hit a record milestone last week after reporting its fourth-quarter earnings. Revenues from its AI business jumped 220% year over year.

Intel, meanwhile, has had a much rougher year. Its CEO Pat Gelsinger — who first joined Intel when he was 18 and was brought back in 2021 after a stint at VMWare — announced his shock retirement earlier this month after struggling to keep pace with rivals like Nvidia in the AI boom.

Gelsinger, who returned to revitalize Intel's manufacturing and design operations, faced several struggles, leading him to announce a head count reduction of roughly 15,000 in August and a suspension of Intel's dividend.

Its challenges have led to several rumors of being bought by a rival, a move that would mark a stunning end to the decades-old chip firm. Buyer interest remains uncertain, however. Bloomberg reported in November that Qualcomm's interest in an Intel takeover has cooled.

Broadcom did not immediately respond to BI's request for comment outside regular working hours.

Another company has publicly cut ties with Broadcom's VMware. This time, it's Ingram Micro, one of the world's biggest IT distributors. The announcement comes as Broadcom eyes services as a key part of maintaining VMware business in 2025. But even as some customers are reducing reliance on VMware, its trillion-dollar owner is laughing all the way to the bank.

IT distributor severs VMware ties

Ingram is reducing its Broadcom-related business to "limited engagement with VMware in select regions," a spokesperson told The Register this week.

"We were unable to reach an agreement with Broadcom that would help our customers deliver the best technology outcomes now and in the future while providing an appropriate shareholder return,” the spokesperson said.

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• Broadcom's stock surged in recent weeks, pushing the company's market value over $1 trillion.
• Broadcom is crucial for companies seeking alternatives to Nvidia's AI chip dominance.
• Custom AI chips are gaining traction, enhancing tech firms' bargaining power, analysts say.

The rise of AI, and the computing power it requires, is bringing all kinds of previously under-the-radar companies into the limelight. This week it's Broadcom.

Broadcom's stock has soared since late last week, catapulting the company into the $1 trillion market cap club. The boost came from a blockbuster earnings report in which custom AI chip revenue grew 220% compared to last year.

In addition to selling lots of parts and components for data centers, Broadcom designs and sells ASICs, or application-specific integrated circuits — an industry acronym meaning custom chips.

Designers of custom AI chips, chief among them Broadcom and Marvell, are headed into a growth phase, according to Morgan Stanley.

Custom chips are picking up speed

The biggest players in AI buy a lot of chips from Nvidia, the $3 trillion giant with an estimated 90% of market share of advanced AI chips.

Heavily relying on one supplier isn't a comfortable position for any company, though, and many large Nvidia customers are also developing their own chips. Most tech companies don't have large teams of silicon and hardware experts in house. Of the companies they might turn to design them a custom chip, Broadcom is the leader.

Though multi-purpose chips like Nvidia's and AMD's graphics processing units are likely to maintain the largest share of the AI chip market in the long-term, custom chips are growing fast.

Morgan Stanley analysts this week forecast the market for ASICs to nearly double to $22 billion next year.

Much of that growth is attributable to Amazon Web Services' Trainium AI chip, according to Morgan Stanley analysts. Then there are Google's in-house AI chips, known as TPUs, which Broadcom helps make.

In terms of actual value of chips in use, Amazon and Google dominate. But OpenAI, Apple, and TikTok parent company ByteDance are all reportedly developing chips with Broadcom, too.

ASICs bring bargaining power

Custom chips can offer more value, in terms of the performance you get for the cost, according to Morgan Stanley's research.

ASICs can also be designed to perfectly match unique internal workloads for tech companies, accord to the bank's analysts. The better these custom chips get, the more bargaining power they may provide when tech companies are negotiating with Nvidia over buying GPUs. But this will take time, the analysts wrote.

In addition to Broadcom, Silicon Valley neighbor Marvell is making gains in the ASICs market, along with Asia-based players Alchip Technologies and Mediatek, they added in a note to investors.

Analysts don't expect custom chips to ever fully replace Nvidia GPUs, but without them, cloud service providers like AWS, Microsoft, and Google would have much less bargaining power against Nvidia.

"Over the long term, if they execute well, cloud service providers may enjoy greater bargaining power in AI semi procurement with their own custom silicon," the Morgan Stanley analysts explained.

Nvidia's big R&D budget

This may not be all bad news for Nvidia. A $22 billion ASICs market is smaller than Nvidia's revenue for just one quarter.

Nvidia's R&D budget is massive, and many analysts are confident in its ability to stay at the bleeding edge of AI computing.

And as Nvidia rolls out new, more advanced GPUs, its older offerings get cheaper and potentially more competitive with ASICs.

"We believe the cadence of ASICs needs to accelerate to stay competitive to GPUs," the Morgan Stanley analysts wrote.

Still, Broadcom and chip manufacturers on the supply chain rung beneath, such as TSMC, are likely to get a boost every time a giant cloud company orders up another custom AI chip.

Apple is working with semiconductor company Broadcom on its first server chip designed to handle AI applications, according to The Information, which cited three people with knowledge of the project.  Apple is known for designing its own chips — called Apple Silicon and primarily manufactured by TSMC — for its devices. But those chips weren’t […]

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Broadcom will no longer take VMware's biggest 2,000 customers directly. Instead, it will work with VMware's 500 biggest customers, giving channel partners the opportunity to participate in deals and provide additional value for VMware customers. The reversal is being viewed as an effort from Broadcom to discourage migrations from VMware, but there's skepticism around how much impact it will truly have.

Various customers have lamented the changes that succeeded Broadcom buying VMware about a year ago. Controversial moves have included ending perpetual license sales, bundling VMware products into a smaller number of SKUs, and ending VMware's channel partner program. These changes have led some firms to consider reducing their business with VMware.

This week, for example, UK-headquartered cloud operator Beeks Group said that a 1,000 percent increase in VMware costs led to it moving most of its 20,000-plus virtual machines to OpenNebula. And numerous customers that Ars Technica has spoken with in the last year are seriously researching or planning total or partial VMware migrations.

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Companies have been discussing migrating off of VMware since Broadcom’s takeover a year ago led to higher costs and other controversial changes. Now we have an inside look at one of the larger customers that recently made the move.

According to a report from The Register today, Beeks Group, a cloud operator headquartered in the United Kingdom, has moved most of its 20,000-plus virtual machines (VMs) off VMware and to OpenNebula, an open source cloud and edge computing platform. Beeks Group sells virtual private servers and bare metal servers to financial service providers. It still has some VMware VMs, but “the majority” of its machines are currently on OpenNebula, The Register reported.

Beeks’ head of production management, Matthew Cretney, said that one of the reasons for Beeks' migration was a VMware bill for “10 times the sum it previously paid for software licenses,” per The Register.

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