Why Broadcom Rallied Today

Shares of semiconductor giant Broadcom (NASDAQ: AVGO) rallied 5.9% on Wednesday as of 12:10 p.m. ET.

Broadcom didn't report any news itself last night or today; however, a bullish forecast by its largest customer for artificial intelligence (AI) application specific integrated chips (ASICs) last night quelled recent fears around slowing AI spend.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »

Alphabet will be a big spender in 2025

On its earnings call last night, Alphabet's management forecast a whopping $75 billion in capital expenditures in 2025 to supply its artificial intelligence build-out. That would be up nearly 50% from the $52.5 billion Alphabet spent in 2024.

The forecast for the huge jump in spending came in spite of Alphabet missing estimates for cloud growth last quarter, which came in at 30% and just below expectations. However, management noted that Google Cloud was supply constrained, saying, "We exited the year with more demand than we had available capacity."

Thus, the spending appears to be serving a real demand, and the forecast appeared to quell recent worries over DeepSeek, the Chinese AI model that was supposedly trained with an extremely low budget. The fear for AI chip stocks in the wake of DeepSeek was that AI models may not need as much computing power as previously thought.

Broadcom itself got caught up in that sell-off last month, as it makes Google's custom AI ASIC accelerators for its data centers. But since Alphabet is clearly not slowing down its deployment of AI infrastructure, the revenue Broadcom derives from making Alphabet's custom chips seems set to continue, along the lines of its previously stated outlook.

Broadcom expects massive growth from AI

Back in December, Broadcom forecast a stunning $60 billion to $90 billion in AI chip revenue by 2027, up from just $12.2 billion last year.

While the DeepSeek revelation seemed to call that massive growth into question last month, Alphabet's bold spending forecast appears to have alleviated those fears today.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $307,661!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $44,088!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $536,525!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

Learn more »

*Stock Advisor returns as of February 3, 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Billy Duberstein and/or his clients have positions in Alphabet and Broadcom. The Motley Fool has positions in and recommends Alphabet. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.