Microsoft is in discussions with Broadcom to design future custom chips, a move that could see the tech giant shift its business away from current supplier Marvell. This development highlights the strategic push by major tech companies to reduce reliance on NVIDIA amid the AI boom.

According to a report on December 5, citing sources familiar with the matter, Microsoft and Broadcom are negotiating a potential partnership for custom chip design. If finalized, Broadcom would replace Marvell as Microsoft's new collaborator in this space.

The potential deal comes as tech giants race to secure more semiconductors to expand their AI product lines. Broadcom is seen as one of the strongest competitors capable of challenging NVIDIA's dominance in the semiconductor market, thanks in part to CEO Hock Tan's preference for large-scale deals and decisive management style.

The talks reflect intensifying competition in the custom chip sector, with manufacturers vying for contracts from major tech firms. Demand for custom chips has surged as companies like Microsoft accelerate AI product development. While NVIDIA currently leads the semiconductor market, tech firms are diversifying their chip supply chains to mitigate dependence on a single supplier.

Custom chips, optimized for specific AI workloads, offer performance and cost advantages, prompting heavy investments from Microsoft, Meta, and others. Three sources involved in development revealed that Meta plans to launch its custom chip by 2027.

The report also notes that Marvell has recently waived some upfront engineering design fees to secure more business from Meta, signaling fierce competition. Broadcom, with its technical expertise and scale, is positioning itself to capture greater market share and emerge as a key challenger to NVIDIA.