Broadcom Inc. shares witnessed a notable surge in Wednesday's extended trading session, a direct consequence of Alphabet Inc.'s announcement regarding a substantial increase in its anticipated capital expenditures for the forthcoming year. This development underscores the growing demand for specialized hardware in the artificial intelligence sector and highlights Broadcom's integral position within the supply chain for leading technology companies.
Alphabet, the parent company of Google, unveiled its fourth-quarter earnings report after the close of the market on Wednesday. The tech giant surpassed market expectations for both revenue and adjusted earnings, reporting $113.83 billion and $2.82 per share, respectively. However, the most significant revelation came from its capital expenditure projections for 2026, which are now estimated to be between $175 billion and $185 billion. This figure dramatically exceeds the analyst consensus of approximately $115 billion, as compiled by LSEG and cited in a Reuters report.
Google's statement within its earnings release emphasized the company's strong belief in the returns generated by its AI investments and infrastructure, which are driving revenue and overall growth. This elevated capital expenditure forecast indicates a substantial increase in spending on critical infrastructure components, including data centers, advanced AI hardware, and cloud computing resources. Such an expansion is particularly beneficial for Broadcom, given its established relationship with Google as a major client for its application-specific integrated circuit (ASIC) business. Broadcom provides high-performance, custom-designed chips for hyperscale data centers, a crucial element in modern AI operations.
A significant aspect of this collaboration involves Broadcom's role in the development and manufacturing of Google's Tensor Processing Units (TPUs). These in-house specialized AI chips are fundamental to Google's internal AI infrastructure, and Broadcom has been a key partner across all generations of these TPUs, contributing expertise in design translation, high-speed interfaces, and packaging. Furthermore, Alphabet reported a robust 48% year-over-year increase in Google Cloud revenue during the fourth quarter, signaling strong growth in its cloud services, which are heavily reliant on advanced hardware.
Sundar Pichai, CEO of Alphabet, highlighted the widespread adoption of Google's first-party AI models, such as Gemini, which now process over 10 billion tokens per minute through direct API usage by customers. The Gemini App itself has garnered a substantial user base, exceeding 750 million monthly active users, further underscoring the company's aggressive push into AI. Following these announcements, Broadcom shares experienced a 6.73% increase, reaching $328.73 in after-hours trading. The stock's Relative Strength Index (RSI) stood at 38.94, suggesting a neutral position leaning towards oversold conditions. Key support levels were identified at $321.50, with resistance around $340. A sustained break above this resistance could signal a potential upward reversal, while a failure to hold the support level might indicate a continuation of recent downward trends.
The significant upward revision in Google's capital spending plans has created a ripple effect, particularly benefiting companies like Broadcom that are deeply embedded in the AI infrastructure supply chain. This strategic investment by Alphabet is expected to fuel continued innovation and expansion in AI capabilities, thereby driving demand for advanced chip technologies and solidifying Broadcom's market position.