Alphabet Is Dropping $190 Billion on AI Infrastructure: 3 Semiconductor Stocks Set to Win Big

Key Points

Broadcom is already a leading designer for Alphabet's processors, and more spending could accelerate its benefits.

Taiwan Semiconductor benefits whenever a major tech company increases its chip investments.

Even with Alphabet designing its own custom chips, it still relies on Nvidia's processors, and the spending spree could spur more rivals to increase spending as well.

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If there was any question about whether the artificial intelligence infrastructure boom is fizzling, the most recent quarterly reports from major tech companies, including Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), shed significant light on the topic.

Alphabet's management raised its capital expenditures (capex) from the previous range of $175 to $185 billion to the current range of $180 to $190 billion.

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That's right, $190 billion of mostly AI spending in just one year.

And next year will be even higher, with Alphabet's management saying spending will "significantly increase compared to 2026."

That's very good news for semiconductor stocks, especially these three.

1. Broadcom could be the biggest winner

Broadcom (NASDAQ: AVGO) designs custom processors for its clients, which include Alphabet. The company's Google Tensor Processing Units (TPUs) are used in AI data centers and the Broadcom-designed chips are increasingly in demand. Just a few weeks ago, Broadcom scored a deal that will extend through 2031 to increase its chip designs for Alphabet.

That was a huge win for Broadcom, and with Alphabet saying that it could increase spending even more next year, Broadcom will likely benefit even further. Even before the announced increase in spending, Broadcom said that its AI revenue will reach $100 billion by 2027 -- up from just $15 billion in fiscal 2025.

Much of the company's AI revenue could come from Alphabet in the coming years, but I don't believe the company is overexposed to just one customer. Broadcom is expected to hold approximately 60% of the application-specific integrated circuit (ASIC) market by 2027.

Its other customers, including Meta, are ramping up AI spending too, giving Broadcom multiple angles to benefit from the surge.

2. Taiwan Semiconductor benefits whenever chip demand spikes

Taiwan Semiconductors (NYSE: TSM) is the world's leading semiconductor manufacturer, accounting for an estimated 70% of all processors.

Its position looks even better when viewed in the context of advanced processors, specifically AI chips. In that area, Taiwan Semiconductor, also referred to as TSMC, holds about 90% of the market.

The combined capital spending for Microsoft, Amazon, Alphabet, and Meta this year is nearing about $700 billion. With much of that going toward AI infrastructure, including making processors, TSMC will likely see ongoing demand for years to come.

Some investors may worry that manufacturing capacity is an issue for TSMC right now, but the company is building new factories to help alleviate bottlenecks. The bigger picture is that TSMC's management expects sales to increase more than 30% this year.

With Alphabet and other tech giants still banging on the doors demanding more processors, TSMC's growth isn't slowing down anytime soon.

3. Don't forget about Nvidia

Nearly any ramp-up in AI infrastructure spending is almost certainly good for Nvidia (NASDAQ: NVDA). The company's GPUs are the leading processors in AI data centers, and it's not likely to lose that lead.

While Google uses its own TPUs for some of its AI processing capacity, they don't fully replace Nvidia's processors. Alphabet will still need to purchase Nvidia GPUs to meet compute demand, which management says is "constrained" right now.

I believe one of the main benefits of Alphabet's ramp up in spending for Nvidia is that it could spur more AI investments by Alphabet's rivals. And that, in turn, could lead to greater demand for Nvidia's processors.

For example, Meta raised its capex estimate recently, too, and will now spend up to $145 billion this year. Other tech giants continue to invest piles of cash, partly out of fear of falling behind.

With about 86% market share for AI data center revenue, Nvidia is an important winner as tech companies duke it out in the AI arena.

There's no telling when AI infrastructure spending will slow down, but with Alphabet and other tech giants continuously increasing their investments, investors should be cautious about calling the end of the AI spending boom too early.

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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Broadcom, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.