Broadcom Inc. (NASDAQ: AVGO) saw its share price climb on Thursday, reflecting renewed investor confidence driven by expanding investments in artificial intelligence infrastructure. The upward momentum followed Alphabet Inc.’s (NASDAQ: GOOGL) announcement of a substantial increase in its capital expenditure forecast, indicating a robust demand surge for AI-related data centers and computing hardware.
In a significant update, Alphabet exceeded expectations with its fourth-quarter earnings and surprised markets by projecting capital spending to reach between $175 billion and $185 billion for 2026. This figure considerably surpasses earlier forecasts around $115 billion, signaling a sustained commitment to expanding data center capacity, enhancing cloud infrastructure, and supporting AI hardware advancements.
Analyst Ben Reitzes from Melius Research remarked on CNBC that Alphabet's bolstered capital expenditure is set to act as a strong catalyst for Broadcom as well as other companies linked to Alphabet’s infrastructure initiatives. According to Reitzes, such investment magnitudes validate the broad AI infrastructure growth trend that Broadcom is well placed to capitalize on.
Central to Broadcom's positioning is its pivotal role in aiding Google’s development and production of custom tensor processing units (TPUs). Unlike relying exclusively on general-purpose chips such as those from Nvidia Corporation (NASDAQ: NVDA), Google often utilizes its proprietary TPUs to run AI software efficiently and at scale. Broadcom's contribution encompasses designing these specialized chips, including hardware that supports advanced AI models like Google’s Gemini.
Furthermore, Broadcom has broadened its AI semiconductor portfolio by engineering custom application-specific integrated circuits (ASICs) tailored to major hyperscale clients. Among its notable engagements, the company supplies TPU-based Ironwood systems to AI research lab Anthropic, reflecting an expanding footprint in bespoke AI chip manufacturing.
Supporting this bullish outlook, Jefferies reaffirmed its Buy rating and set a $500 price target for Broadcom. The investment firm highlights that Broadcom remains strongly positioned to benefit from growing demand in AI and networking sectors. It views Google's ramped-up capital expenditure plans as a significant endorsement of continued investments in AI infrastructure, complemented by additional momentum from companies such as OpenAI, xAI, and Oracle Corporation (NYSE: ORCL).
However, amid this optimism for certain AI-related stocks, market volatility particularly affecting technology-heavy portfolios has been pronounced. CNBC's Jim Cramer noted that the recent fluctuations underscore the importance of diversification, given that technology stocks faced some of the steepest declines. He emphasized that various tech companies have lost part of their allure following shifts in enterprise software demand, which has waned as AI evolves.
Cramer specifically highlighted sell-offs among semiconductor firms including Advanced Micro Devices, Inc. (NASDAQ: AMD), Broadcom, and Micron Technology, Inc. (NASDAQ: MU), alongside persistent softness in software companies such as Oracle. Conversely, sectors deemed part of the "old economy," including consumer staples, healthcare, banking, and industrials, demonstrated relative strength. These sectors offer more consistent earnings, dividends, and buyback programs, along with more conservative valuations, garnering increased investor interest in contrast to the tech sector's current volatility.
On Thursday, Broadcom shares were trading approximately 3.32% higher at $318.27 according to data from Benzinga Pro, reflecting a positive market reception to the combination of Alphabet’s spending plans and Broadcom's operational prospects within AI chip production.