Broadcom shares jumped 10.3% Monday as investors bet big on the chipmaker's deepening partnership with Google's AI infrastructure. The rally comes as analysts lift price targets, seeing Broadcom as the hidden winner behind Google's custom chip strategy that's been quietly building since 2016.
Broadcom just had its best trading day in seven months, and it's all about a partnership that most investors overlooked until now. The semiconductor giant surged 10.3% Monday as Wall Street finally woke up to its critical role in Google's AI infrastructure buildout.
The rally wasn't random. Alphabet shares climbed over 5% as the AI trade regained momentum, dragging Broadcom along for what analysts are calling a "derivative play" on Google's AI dominance. But this isn't just about riding coattails - Broadcom has been Google's exclusive partner for custom AI chips since 2016, a relationship that's now hitting serious scale.
Here's what investors are betting on: Google processes an insane amount of data through its custom tensor processing units (TPUs), and Broadcom designs and manufactures every single one of them. These aren't off-the-shelf chips - they're application-specific integrated circuits (ASICs) built specifically for Google's AI workloads, competing directly with Nvidia's GPUs.
The numbers tell the story. Google's token processing jumped from 480 trillion in April to 1,300 trillion in October, according to Jefferies analyst Blayne Curtis. That's nearly a 3x increase in eight months, and Curtis expects it to keep climbing as Google rolls out multimodal AI models that need even more compute power.
"Google has long been the main ASIC customer for AVGO but those volumes should become much more meaningful in C26/27," Curtis wrote in a November 3rd research note. He's got the highest price target on Broadcom among all analysts tracking the stock, lifting it to $480 last week - implying another 41% upside from current levels.
Melius Research's Ben Reitzes is equally bullish, bumping his target to $475 in October. His take? Google and Broadcom's custom ASIC partnership is "now starting to inflect to the upside," delivering growth for both Broadcom's AI revenues and Google Cloud's expansion. "Outside of the Nvidia GPU for AI workloads, the TPU is the most proven ASIC out there," Reitzes told clients.
