Broadcom and TSMC will emerge as big winners in the custom AI chip boom

The AI ​​chip race is not just a one-horse race led by Nvidia (NVDA).

As hyperscalers like Google ( GOOG , GOOGL ), Meta ( META ), and Microsoft ( MSFT ) race to lower the eye-watering costs of running large AI models, Broadcom ( AVGO ) is opening a second front in the custom silicon wars as its primary architect.

“Broadcom is projected to maintain its leadership as the premier AI server compute ASIC design partner with a 60% market share in 2027,” according to a recent report by Counterpoint Research.

This dominance is underpinned by a symbiotic relationship with the world’s most advanced foundry, Taiwan Semiconductor Manufacturing Company (TSM), which is the “dominant foundry of choice…” with nearly 99% wafer fabrication share for AI server compute and ASIC shipments among top 10 players.

This shift indicates that the industry is moving beyond Nvidia’s expensive, all-purpose GPUs. While Nvidia offers a powerful all-purpose AI tool, tech giants are increasingly designing their own application-specific integrated circuits (ASICS) to suit their unique workloads.

Broadcom thrives here by acting as a bridge, turning these internal corporate blueprints into functional hardware. Hitchhiking its wagon to domestic capital spending by the world’s wealthiest companies, Broadcom has seen its stock rise nearly 55% over the past year.

The cost savings incentive for these veterans is huge. Goldman Sachs analyst James Schneider noted that the Google-Broadcom TPU (Tensor Processing Unit) is quickly closing the performance gap with Nvidia, estimating a 70% reduction in “cost-per-token” as the technology evolves from TPU v6 to v7.

In a world where AI inference costs can seriously impact balance sheets, that efficiency is a powerful gravitational pull toward custom silicon. Google famously trained its Gemini 3 entirely on its TPUs.

However, the custom chip boom is not a rising tide that lifts all boats equally. Marvell Technologies ( MRVL ), often cited as Broadcom’s primary challenger, is currently navigating “design win headwinds.” Counterpoint’s analysis suggests Marvel’s design services share could slide to 8% by 2027, even as its total shipment volume increases.

Goldman Sachs remains neutral with a $90 price target on Marvell, with the company’s fortunes tied to the Amazon Terenium program, which has faced its own performance hurdles and is often seen as playing catch-up on Nvidia’s chips.

While some on Wall Street, including Raymond James analyst Simon Leopold, remain bullish on Marvel as a long-term “share gainer,” the immediate data supports Broadcom’s grip on high-volume contracts. The firm issued a strong buy rating on Marvell with a $121 price target, while giving Broadcom a $420 target.