Tech analyst calls valuation in this big chip stock a rare “gift” for investors

Investing.com — Rising artificial intelligence spending across Big Tech is sharpening investor focus on the companies supplying the core infrastructure behind the buildout, with one semiconductor name emerging as a clear beneficiary of surging data-center capex.

Google parent Alphabet (NASDAQ:GOOGL) is among a group of technology giants sharply lifting investment to expand AI-focused data centers. Much of that spending is going into servers, compute power and networking — areas closely tied to the production of custom AI chips and the infrastructure that connects them.

Mizuho TMT specialist Jordan Klein said the post-capex surge trade increasingly points toward Broadcom (NASDAQ:AVGO), which plays a central role in building Google’s tensor processing units, or TPUs, alongside key networking components used inside modern data centers.

“We know that at least 60% of the GOOG $180B capex guide is servers. So that is a ton of compute, and a lot of TPUs made by AVGO,” Klein wrote, adding that Google will both use the chips internally and sell compute capacity externally to more AI customers.

Unlike many AI workloads that rely on graphics processors from Nvidia, Google has increasingly leaned on its in-house TPU architecture, with Broadcom supporting production through its growing custom chip, or ASIC, business. That push extends beyond compute into networking and connectivity, which Klein said sits within the remaining portion of Google’s infrastructure spending.

“AVGO IS THE BIGGEST WINNER in my view and low $300s to me is a close to a ‘gift’ you will ever see, assuming you have duration and patience,” Klein wrote in his pre-open note.

Broadcom’s custom silicon push has also expanded beyond Google. The company recently began selling Google’s TPU Ironwood rack systems to Anthropic, underscoring rising commercial demand for non-GPU AI hardware.

Shares of Broadcom have fallen nearly 30% from their peak, a pullback Klein views as creating a rare long-term entry point as AI infrastructure spending continues to accelerate across the tech sector.

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