Prediction: This Stock Could Be the Biggest Winner From Alphabet's Spending Spree

Alphabet set a dramatically higher 2026 capex budget of $175–185 billion (versus $91 billion in 2025), allocating roughly 60% to servers—much of it semiconductor-related—and 40% to long-duration assets such as data centers and networking. Broadcom, as co-developer and supplier of IP for Alphabet’s TPUs and a leader in data-center networking (Tomahawk switches and optical interconnects), stands to benefit materially: Citigroup estimates Alphabet drove about $13 billion of Broadcom ASIC revenue in fiscal 2025, Broadcom booked roughly $63.9 billion revenue in fiscal 2026, and it also has a reported $21 billion TPU order from Anthropic; the article projects substantial upside to Broadcom’s ASIC and networking revenue on Alphabet’s spending shift to TPUs.

Analysis

Market structure: Alphabet’s move (GOOGL/GOOG capex $175–185B for 2026 vs $91B in 2025) disproportionately benefits Broadcom (AVGO) and foundries (TSM) because TPUs and Tomahawk switches are high-value, high-margin items. Expect AVGO ASIC revenue to scale materially (Citigroup: Alphabet ~ $13B of AVGO ASIC rev in FY25) and networking rev to rise, while NVDA faces demand headwinds in specific hyperscaler workloads; pricing power should shift modestly toward custom ASIC suppliers but remain contested by GPU software ecosystems.

Risk assessment: Key tail risks are geopolitical/export controls on advanced nodes (TSM/US-China tension), single-customer concentration (Alphabet/Anthropic orders represent large chunks of forward rev), and foundry capacity bottlenecks that could delay revenue recognition. Timeline: immediate — repricing/volatility in AVGO/TSM/NVDA (days–weeks); short-term — order flow and deliveries visible in Q2–Q4 2026; long-term — structural share gains if TPUs displace GPUs over 2–4 years. Watch: TSM wafer-start cadence, Broadcom quarterly bookings, and Alphabet capex cadence.

Trade implications: Tactical long AVGO (establish 2–3% portfolio position, target +25% in 6–12 months, stop-loss -12%) and add TSM (1–2% overweight, scale in on >10% pullback) to capture foundry upside. Pair trade: long AVGO / short NVDA sized 1:0.6 (dollar basis) for 3–12 months to express TPU adoption risk to GPUs; hedge with AVGO 9–12 month call spread (buy ATM, sell ~15% OTM) sized to risk 1–2% of portfolio. Reduce NVDA exposure by 5–10% if price spikes >20% without fundamental upside.

Contrarian angles: The market may be overpricing an immediate revenue doubling for AVGO — physical delivery, wafer lead times, and pricing concessions often stagger recognition (historical hyperscaler cycles show supplier margin compression after large capex waves). Nvidia’s software stack and model compatibility could blunt TPU displacement, and Broadcom’s growing customer concentration increases negotiation and execution risk. Monitor contract confirmations (binding vs conditional) and TSM capacity statements; absence of concrete delivery schedules would argue for a more cautious entry or option-defined exposure.

Key Decisions for Investors

• Establish a 2–3% portfolio long position in Broadcom (AVGO) within 1–4 weeks, scaling 50% now and 50% on a 5–8% pullback; target +25% return over 6–12 months and set an initial stop-loss at -12% to limit execution/contract risk.
• Add a 1–2% position in Taiwan Semiconductor (TSM) as a tactical foundry play for 12–18 months; scale in on any >10% pullback and trim if TSM announces sustained wafer-start increases or geopolitical export restrictions.
• Implement a relative-value pair: long AVGO / short NVDA sized 1:0.6 (dollar-neutral) for a 3–12 month horizon to express TPU adoption over GPUs; close or rebalance if AVGO outperforms by >30% or NVDA reports upside guidance tied to new AI model wins.
• Use options to define risk: buy AVGO 9–12 month call spreads (buy ATM, sell ~15% OTM) sized to risk 1–2% of portfolio, or sell cash-secured AVGO puts ~8–12% below current price to earn yield and potentially lower entry if fundamentals remain supportive.