Why Broadcom Stock Is Falling Today

Shares of semiconductor company Broadcom (NASDAQ: AVGO) were tumbling today after it was reported that the company is testing out Intel's manufacturing chip process. Broadcom designs its chips, but doesn't manufacture them. Most of the company's processors are currently made by Taiwan Semiconductor Manufacturing (TSMC).

Broadcom investors evidently don't like the idea of the company potentially using Intel as its manufacturer, and sent the stock down by as much as 4.2% today. Broadcom's shares fell by 2.2% as of 11:25 a.m. ET.

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Testing out a potential manufacturer

It's not uncommon for chip designers to occasionally run tests with chip manufacturers to see if their process could be beneficial. But Broadcom's test of Intel's 18A process caught investors' attention, likely because Intel has struggled to get its particular advanced processing production off the ground.

Intel delayed its potential manufacturing contracts for its 18A process until 2026, and recent reporting from Reuters shows that the timeline has been pushed back an additional six months.

The 18A process is for making advanced artificial intelligence (AI) chips, which is the bread and butter of Taiwan Semiconductor's manufacturing. Broadcom investors may be concerned that if the company moves some of its chip manufacturing to Intel, it could slow down production or delay the release of new processors.

Nothing is set in stone yet

Neither company made comments about a partnership or new deals, and no official contracts have been announced. That means Broadcom investors should take a wait-and-see approach to this news and not make any investment decisions based on preliminary testing.

Even if the company decided to move some of its chip manufacturing to Intel, it's unlikely it would make a drastic transition at a time when Intel is still trying to find its footing amid production slowdowns. Broadcom is most likely trying to figure out what manufacturing options it has available and how well Intel's 18A process has developed.

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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: short February 2025 $27 calls on Intel. The Motley Fool has a disclosure policy.