2 Stocks to Buy as Google Starts Selling Its AI Chips
Alphabet (GOOGL, GOOG) began selling its AI chips (TPUs) in Q2, recognizing revenue from limited customer agreements. Broadcom (AVGO) supplies these chips and reported significant AI revenue growth, with $16.7B in Q3. Alphabet's cloud revenue grew 82% YoY to $24.8B, with TPU sales contributing to a $514B backlog. Both companies are positioned to benefit from AI chip sales.
How this was made
The 30-second read
Why it matters
The announcements introduce a new revenue stream for Alphabet and reinforce Broadcom's position as a key AI‑chip supplier, potentially driving stock price appreciation.
Market read
Both stocks are positioned to benefit from expanding AI hardware demand, offering a thematic play on AI infrastructure.
What to watch
Customer concentration risk for Broadcom and capital‑intensive spend by Alphabet could pressure cash flow.
Background
Alphabet began selling its custom AI chips (TPUs) to external data centers in Q2, while Broadcom secured supply contracts and reported strong AI semiconductor revenue growth.
Ticker impact
Broadcom disclosed new long‑term agreements to supply custom TPUs for Google and guided AI semiconductor revenue of $21.7 bn for Q4, a fresh material update.
potential upside of 10‑15% over the next quarter
Guidance shows double‑digit growth and the company benefits from Google’s new hardware sales.
Alphabet reported its first recognized revenue from selling TPU systems to customer data centers in Q2, a new revenue stream beyond cloud rentals.
supportive for the stock, possible 5‑8% upside if margins hold
TPU hardware sales are early but complement cloud growth; impact limited by small scale.
Market effects
Accelerates AI‑hardware demand, benefiting semiconductor and cloud infrastructure sectors.
U.S. tech stocks may see broader uplift as AI spending gains momentum.
Signals growing AI hardware ecosystem worldwide, could influence global chip makers.
Counterpoint
TPU sales are still nascent; high valuation multiples may not be justified if margins stay low.
Key entities
- CompanyAlphabet Inc.
Parent of Google, now recognizing revenue from TPU system sales.
- CompanyBroadcom Inc.
Supplier of custom TPU chips to Google with strong AI revenue guidance.
