Broadcom's stock rises on Google's spending plans, but Nvidia's stock extends decline

By Britney Nguyen

Google plans to spend up to $185 billion this year, and analysts say its data-center suppliers stand to benefit

Alphabet's Google raised capex guidance for 2026 to between $175 billion and $185 billion.

Google sent a major signal that the artificial-intelligence spending spree is nowhere near over, but that's failing to lift semiconductor stocks, which have been caught up in the technology selloff.

Alphabet's Google (GOOGL) (GOOG) raised its capital-expenditure forecast to between $175 billion and $185 billion for 2026 on Wednesday afternoon - meaning the company could shell out about double the money it did last year.

"Google's increase in capex may be the biggest increase we have seen on data-center spend since the beginning of the AI investment cycle," D.A. Davidson's head of technology research, Gil Luria, told MarketWatch.

Most of Google's spending will go toward equipment for its data-center servers, according to Luria, and that's "almost entirely" chips, he said in emailed comments. Google uses both its in-house tensor processing units and Nvidia's (NVDA) graphics processing units to train and run its models.

"That is a very good sign that the semi-cycle will be even more pronounced than previously thought," Luria said.

Broadcom's stock (AVGO) was up 2% on Thursday morning after the market open, as the company works closely with Alphabet on custom chips. But shares of Nvidia and Advanced Micro Devices (AMD) reversed initial gains to trade lower and extend recent declines. Shares of Micron Technology (MU) (KR:067310) and shares of Sandisk (SNDK) did the same.

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Still, Jefferies analyst Blayne Curtis said Google's capex boost "offers a significant vote of confidence for AI spend moving higher."

He said Google's spending guide will help custom-chip maker Broadcom shake off two issues that have been weighing on its stock. Broadcom has worked with Google on its custom TPUs, a form of application-specific integrated circuits, for more than a decade.

One issue is the ongoing concern over the sustainability of AI spending. The other is the idea that Broadcom could face disruption from customer-owned tooling, he said, referring to how a company like Google could take control over its chip-manufacturing process instead of relying on its partner to handle things like wafer supply, testing and shipping.

But Curtis said in a Wednesday note that the "overhang" of customer-owned tooling on Broadcom's stock is "overdone." He added that he sees momentum from networking providers, which could contribute to more upside for ASIC makers like Broadcom.

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Richard Windsor, founder of independent research firm Radio Free Mobile, said Google's suppliers are "the big winners in the short term" from the capex raise. He expects Broadcom, Nvidia and Taiwan's MediaTek (TW:2454) to see stronger demand for products. Google is reportedly looking to work with the Taiwanese chip maker on its TPUs.

Google's ability to spend up to $185 billion on data-center capacity gives it "a colossal advantage over OpenAI," Windsor said, as the two compete to be the dominant AI model maker.

Every time OpenAI wants to spend money, Windsor said, it needs to raise money - "and it only takes one investment round to go badly for the whole house of cards to fall." That would hand the AI crown to Google among Western AI companies, he said.

While Google would also be at risk from an OpenAI fallout, Windsor said it would have the advantage of cutting back on its spending since "it will no longer be in a race, and it will survive to pick up the pieces and dominate the industry."

-Britney Nguyen

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02-05-26 1028ET