Broadcom, Nvidia shares rise on surging Google capital expenditures for AI

Shares of Broadcom experienced a significant increase of 6% in after-hours trading on Wednesday, following Google's announcement of robust earnings and a notable rise in capital expenditures dedicated to artificial intelligence. The tech giant revealed that it anticipates spending up to $185 billion on capital expenditures this year, nearly double its expenditures from the previous year. Ben Reitzes, the head of technology research at Melius Research, highlighted the positive implications of this spending surge, stating, "That is an incredible number. We are laughing because that number is so good for the Google cohort." This sentiment was expressed during his appearance on CNBC's "Closing Bell Overtime." Google is among a select group of technology firms ramping up their capital investments to enhance their data centers specifically for AI purposes. Notably, while Google’s AI software predominantly utilizes its own tensor processing units (TPUs), Broadcom plays a crucial role in the development of these TPUs. For instance, Google's advanced Gemini 3 model was built using TPUs. Broadcom is also expanding its custom chip business, focusing on application-specific integrated circuits (ASICs), which experts suggest may outperform traditional chips for certain AI tasks. Last December, Broadcom announced plans to sell Google's TPU Ironwood rack systems to Anthropic, another player in the AI sector. Analysts believe that custom AI chips are primarily beneficial for leading firms, often referred to as hyperscalers. Currently, Broadcom is developing custom chips, referred to as "XPUs," for five different clients, including Google and Anthropic. Other tech giants like Microsoft, Amazon, and Meta are also venturing into custom chip development, although Broadcom has not disclosed its other partnerships. Hyperscalers generally require collaboration with semiconductor companies like Broadcom to incorporate essential intellectual property and facilitate chip manufacturing. In a related note, Nvidia shares also saw a rise of 2% in after-hours trading. Reitzes mentioned that the increase in Google’s capital expenditures could benefit Nvidia as well, stating, "It's probably good for Nvidia too because they are going to spread the love, not just their own TPU but also to Nvidia."