A Broadcom circuit board for chip testing is pictured during a lab tour as Broadcom prepares to launch new optical chip tech to fend off Nvidia in San Jose, California, U.S., September 5, 2025.
Brittany Hosea-small | Reuters
Broadcom (AVGO) shares surged 11.1% on Monday, leading the S&P 500 in a rally fueled by renewed investor interest in AI-linked technology stocks. The market is increasingly recognizing the chipmaker’s strategic importance as a key enabler of Alphabet’s (GOOGL) expanding AI ambitions.
Broadcom, a dominant supplier of high-performance, application-specific integrated circuits (ASICs) for hyperscale computing environments, has witnessed a robust 60% year-to-date gain. Monday’s performance marked the company’s strongest single-day increase since April 9th, solidifying its position as the top performer within the Technology Select Sector SPDR fund (XLK), which tracks the S&P 500 technology sector.
The upward trajectory of Broadcom’s stock aligns with the continued investor enthusiasm surrounding Alphabet. The Google parent saw its shares climb over 5% as the AI sector regained momentum after recent corrections.
The synergy between the two companies revolves around ASICs, with Google emerging as a significant client for Broadcom’s ASIC division. Broadcom plays a crucial role in the design and manufacture of Google’s Tensor Processing Units (TPUs), proprietary AI chips integral to Google’s internal AI infrastructure. These TPUs are increasingly seen as viable alternatives to Nvidia’s graphics processing units (GPUs) for specialized AI workloads, representing a key battleground in the AI hardware landscape.
Bolstered by the deepening partnership with Alphabet, analysts have recently revised their projections for Broadcom, reflecting increased confidence in the company’s future prospects. The adoption of ASICs is driven by efficiency and performance advantages, allowing companies like Google to optimize their AI infrastructure for specific workloads beyond what general-purpose GPUs can offer.
Ben Reitzes of Melius Research reiterated a “buy” rating on Broadcom last month, raising the price target by $60 to $475, signaling a potential upside of 39.6% from Friday’s closing price.
“Google and Broadcom have been collaborating on custom ASICs since 2016, and are now in their seventh generation. Outside of Nvidia’s GPUs, the TPU stands out as the most established ASIC, gaining considerable traction. Google’s early investment in this product is now yielding significant returns, benefiting both Broadcom’s AI revenue stream and Google Cloud (GCP) growth,” Reitzes noted in an October 27 report.
“While Alphabet benefits directly, Broadcom may see even greater gains, potentially achieving substantial growth in its AI revenues through its partnership with Alphabet and others seeking similar design expertise,” he added, emphasizing that “TPUs are becoming an increasingly important element of Alphabet’s growth strategy.” The strategic advantage of custom ASICs like TPUs extends beyond raw performance, encompassing factors like power efficiency, security, and integration with specific software frameworks, creating a defensible competitive moat.
Broadcom stock performance over the past year.
Jefferies analyst Blayne Curtis, holding the highest price target for Broadcom according to LSEG data, designated the stock as a top pick earlier this month, highlighting that ASICs are reaching an “inflection point” with Google’s escalating demand for tailored chips.
“Google has long been AVGO’s primary ASIC customer, but these volumes should rise more substantially in calendar years 2026/2027,” Curtis wrote in a November 3 note. “Google reports increasing the amount of tokens they process per month and announced 1,300T in October, up from 480T in April 2025. This trend is expected to accelerate further as compute capacity is needed for handling multimodal models.” This exponential growth in compute demand underscores the need for specialized hardware solutions that can outperform general-purpose alternatives.
Curtis maintains a “buy” rating on Broadcom’s shares and increased the price target by $65 to $480, implying a possible 41% increase.
Dan Ives, Wedbush Securities global head of technology research, expressed strong optimism about both Broadcom and Alphabet.
“Broadcom and Alphabet are emerging as key AI plays, as the market increasingly acknowledges the large market for ASIC chips, with Google leading the charge,” he stated. “This could be the most validated ASIC chip on the market. We are still early in the AI Revolution… sentiment has shifted dramatically in a short period to a very bullish consensus.” The rising demand for specialized chips represents a fundamental shift in the architecture of computing, mirroring the transition from CPUs to GPUs for graphics and gaming, AI presents a new frontier for hardware innovation.
Alphabet shares are up 21% over the past month, outperforming its “Magnificent Seven” peers and propelling the broader market higher in recent trading sessions. Investors have reacted positively to Google’s latest AI model, and its upcoming seventh-generation TPU.
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