$AVGO

Summary

The analyst expresses concern that Google's shift to a COT model with TPU v9 will negatively impact Broadcom's margins, implying a bearish stance on Broadcom (AVGO).

Reasoning

Google moving to a COT model means Broadcom and MediaTek would be downgraded to design service roles, reducing their per-chip margins and revenue recognition, which is negative for Broadcom especially.

Rumor: Google to shift to a COT model starting with TPU v9, downgrading the role of MediaTek/Broadcom. This would be a major negative for Broadcom and MTK. According to this rumor, starting with TPU v9, Google plans to move to a model similar to AWS’s Annapurna, where Google directly places wafer orders with TSMC. In other words, Google would be doing COT directly. What does that mean? Google would become TSMC’s direct customer, while Broadcom and MediaTek would be downgraded to IP support / design service roles. Ownership of the chip and control over supply would shift toward Google. In other words, Broadcom/MediaTek’s per-chip margin would fall, if this is true. Instead of recognizing the full chip ASP as revenue, the model would shift toward design service fees / margin. That makes me more worried about Broadcom than MediaTek. $AVGO

Return by horizon