Today's dip in Broadcom's share price can be attributed to...
Leading semiconductor company Broadcom (AVGO -1.39%) faced a setback on Thursday, following whispers that a major client might be expediting their shift away from Broadcom's hardware. The news prompted investors to sell off Broadcom's shares by over 1%, a steeper decline compared to the 0.5% dip experienced by the prestigious S&P 500 index.
Switching gears
In the early hours, Bloomberg disclosed that tech juggernaut Apple (AAPL 0.60%) is contemplating to adopt one of its own chips to manage the Bluetooth and WiFi technology that bonds iPhones and iPads, along with other devices, starting from the next year. This would essentially replace several components provided by Broadcom currently.
Relying on "sources close to the matter," Bloomberg stated that Apple's Proxima chip will be integrated into the first products as early as 2025. The production of this chip will be handled by the world's leading contract chip manufacturer, Taiwan Semiconductor Manufacturing.
Any reduction in Broadcom's involvement with Apple devices is a worry, considering that at present, around 20% of Broadcom's total revenue comes from Apple.
Neither Apple nor Broadcom has issued any formal response regarding the Bloomberg article as yet.
No big deal, maybe
If the information is verified, the anticipated switch would be a piece of Apple's broader plan to substitute parts engineered by other companies with their exclusive, proprietary components. While this may not spell doom for Broadcom, as they also garner considerable business from other associates, it's bound to have a minor impact on their basics.
The rather moderate sell-off in response to the news suggests that investors believe minimal damage will ensue, at least in the nearby future. Shareholders of Broadcom shouldn't panic just yet.
The potential shift of Bluetooth and WiFi management from Broadcom's chips to Apple's Proxima chip could impact Broadcom's finance, as around 20% of their revenue comes from Apple. This change, if verified, might encourage some investors to reconsider their investments in Broadcom's stock, potentially affecting its overall money flow in the short term.
Considering that Apple intends to use their proprietary chip for a broad array of devices, and Broadcom has other notable clients, any financial consequences might not be catastrophic but rather a temporary adjustment in their investing strategy.
