The artificial intelligence (AI) market is booming, with both AI infrastructure and cloud computing providers seeing huge growth. Two of the companies at the forefront of this charge are Alphabet (GOOGL 1.03%) (GOOG 1.04%) and Broadcom (AVGO +2.94%), which just so happen to have co-developed Alphabet’s well-renowned Tensor Processing Units (TPUs).
TPUs link Alphabet and Broadcom together and have been a huge part of their success. These are custom AI application-specific integrated circuits (ASICs) that the two companies co-developed more than a decade ago, and they now make up the foundation of Alphabet’s cloud platform. Alphabet designs the chips, while Broadcom provides proprietary IP around high-speed Serializer/Deserializer (SerDes) and manages the physical design and complex packaging integration.
Let’s look at why both AI stocks are poised to remain long-term winners.
Alphabet: The TPU advantage
Today’s Change
(-1.03%) $-3.92
Current Price
$376.42
Key Data Points
Market Cap
$4.6T
Day’s Range
$373.53 – $378.53
52wk Range
$162.00 – $408.61
Volume
878.9K
Avg Vol
28.3M
Gross Margin
60.43%
Dividend Yield
0.22%
Alphabet’s TPUs have given it a big advantage in the AI race. The company has been using the chips to run its internal workflows for more than a decade and has optimized its entire hardware and software stack around them. This has given the company a big head start in the custom AI chip race, with its chips now on their eighth generation and already battle-tested.
By having its own world-class AI chips, Alphabet gets better economics from its cloud unit and can train its AI models and run inference at a much lower cost than competitors that largely rely on Nvidia‘s graphics processing units (GPUs). Last quarter, Alphabet saw its cloud computing revenue surge 63% to $20 billion, while its operating income tripled to $6 billion. At the end of Q1 2026, the company had a whopping $460 billion Google Cloud backlog. Meanwhile, its chips are so well regarded that it is now allowing a select group of customers to place TPU orders with Broadcom for use both within and outside Google Cloud. This adds another high-margin revenue stream for Alphabet.
Alphabet also uses its TPUs to train its premier Gemini frontier models and to run inference. This reduces costs and positions the company well in the consumer AI market, where it can cost-effectively drive growth by leaning into its distribution and ad network advantages. Through its ownership of market-leading browser Chrome and smartphone operating system Android, together with a search revenue-sharing deal with Apple, Google is essentially the gateway to the internet, and the company has been able to incorporate Gemini with search and other products to drive profitable growth.
As the only company with leading chips and a world-class frontier model, Alphabet is very well positioned to be a long-term AI winner.
Image source: The Motley Fool.
Broadcom: The ASIC leader
Today’s Change
(2.94%) $13.13
Current Price
$459.90
Key Data Points
Market Cap
$2.1T
Day’s Range
$442.36 – $466.00
52wk Range
$241.11 – $466.05
Volume
1.5M
Avg Vol
23.8M
Gross Margin
64.96%
Dividend Yield
0.56%
TPUs are also a big growth driver for Broadcom. Because it is the company that physically delivers the chips, it is the one that records the revenue from their sales. Alphabet is spending aggressively on AI infrastructure, and a lot of that money is getting directed toward TPUs. Anthropic has also placed a massive $21 billion TPU order with Broadcom to be delivered this year, and the large language model maker has committed to buying an additional 3.5 gigawatts worth of computing capacity in the future from the companies.
Meanwhile, given the success of TPUs, other hyperscalers (owners of large data centers) have also turned to Broadcom to help them develop their own custom AI chips. The company expects to generate more than $100 billion in ASIC revenue in fiscal 2027, while Citigroup recently projected it would produce $180 billion in AI revenue in fiscal 2028. That’s massive growth from a company that generated less than $64 billion in total revenue last year, of which about $20 billion was from AI.
As hyperscalers look to diversify their supply chains away from Nvidia, Broadcom is poised to be one of the biggest beneficiaries moving forward. With explosive growth on the horizon, the stock is a buy.
