Shares of semiconductor giant Broadcom (AVGO 0.98%) 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.
NASDAQ: AVGO
Key Data Points
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.
