Thursday has been a rough day of trading for Broadcom (AVGO) -) investors as news that Google (GOOGL) -) is about to make a big move away from the company has weighed on the stock.
A report from The Information suggested that Google executives have discussed leaving Broadcom as its supplier of artificial intelligence as soon as 2027, instead choosing to design the tensor processing units in-house, potentially saving Google billions in the process.
Related: Marvell shares higher as chipmaker linked to Google AI investment drive; Broadcom slides
Broadcom stock immediately dropped as much as 6% Thursday following the report. The company has been seen as the second-biggest beneficiary from the AI boom, behind Nvidia (NVDA) -), but if Google pulls away from the company that will no longer be the case.
Earlier this year, analysts at JPMorgan estimated that Broadcom would get $3 billion in revenue from Google this year due to the AI-induced acceleration TPU processor orders from the tech giant.
But spokesperson told Reuters that Google's "work to meet our internal and external Cloud needs benefit form our collaboration with Broadcom; they have been an excellent partner and we see no change in our engagement."
Broadcom shares pared their losses and were down only 1.6% at last check.
Additionally, Google has also been looking to replace Broadcom with Marvell Technology (MRVL) -) as its supplier for chips that connect servers to ethernet switches in its data centers, according to the report.
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CNBC's Jim Cramer pumped the brakes on the market panic earlier this afternoon when he tweeted that the report from The Information was "patently false."
I reiterate that the Google to move from Broadcom story I believe to be patently false.. i will discuss at our monthly club meeting at noon.
— Jim Cramer (@jimcramer) September 21, 2023
Cramer may be right and the report may be erroneous, but he is not just a dispassionate observer of the situation.
Jim Cramer's charitable trust has been very bullish on the stock in recent weeks, snapping up more shares following its post-earnings pullback earlier in September.
At the time, Cramer warned CNBC club members that Broadcom is known for "under-promising and overdelivering" when it comes to guidance.
Despite the more than 10% drop the stock has experienced over the past three weeks since it released its guidance, Broadcom shares are up more than 40% year to date.
But a lot of that growth is tied to expectations that its AI chip business will be similarly as lucrative as Nvidia's.
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