letter (Nasdaq: Google) (Nasdaq: Google) The company shocked investors when it announced its fourth-quarter results when it set a 2026 capital spending budget of $175 billion to $185 billion. That’s a huge increase compared to $91 billion in capital spending in 2025.
About 60% of spending will be on servers and about 40% on long-term assets such as data centers and network equipment. In the server space, most spending will be on semiconductor chips. Meanwhile, network equipment such as Ethernet switches and fiber optic cables are included in the long-term assets, as well as buildings and substations.
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The biggest winners from this spending may be Broadcom (NASDAQ:AVGO).
Broadcom is a co-developer of Alphabet’s tensor processing units (TPUs), which Alphabet uses to run its internal artificial intelligence workloads. Alphabet provides the design, while Broadcom provides key intellectual property and manages relationships with foundries, e.g. TSMCconverting designs into physical chips that can be manufactured at scale. Meanwhile, Broadcom records revenue per chip produced. This is estimated to be approximately $13,000. While it’s a lot, it costs less than half as much as one of these NVIDIAgraphics processing unit (GPU).
At the same time, Broadcom is also a leader in the network field. Its Tomahawk Ethernet switches are the industry standard for large data centers. It also provides high-performance fiber optic interconnect solutions and other components required for AI data centers. Broadcom’s networking portfolio also has higher gross margins than its custom artificial intelligence application specific integrated circuit (ASIC) chip business.
based on Citigroup Alphabet is estimated to account for nearly $13 billion in Broadcom ASIC revenue in fiscal 2025. That would account for nearly 17% of Alphabet’s capital expenditures over the same period (note, their fiscal years don’t match). Given that Alphabet is pushing TPUs instead of GPUs, this ratio will increase, and Alphabet’s TPU revenue may double or even triple next year. It should also see significant growth in network revenue.
At the same time, Broadcom also received a $21 billion TPU order from Anthropic for AI workloads that will be delivered on Google Cloud this year. With Broadcom’s fiscal 2026 revenue at just $63.9 billion, its total revenue could double this fiscal year.
Broadcom has one of the best growth runways in AI infrastructure as more customers also turn to Broadcom to help them design their own custom chips, including OpenAI, and given the success of Alphabet’s TPUs. In the meantime, my prediction is that Broadcom stock will be the biggest winner from Alphabet’s spending spree.
Before buying Broadcom stock, consider the following factors:
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Geoffrey Seiler has worked at Alphabet and Broadcom. The Motley Fool owns and recommends Alphabet, Nvidia and TSMC. “Motley Fool” recommends Broadcom. The Motley Fool has a disclosure policy.
Prediction: This stock could be the biggest winner from Alphabet’s spending spree Originally published by The Motley Fool