Broadcom’s New AI Partnership With Google and Anthropic Could Supercharge the Next Leg of the Rally

• Broadcom provides 3.5 gigawatts of computing infrastructure for Anthropic’s Claude models in a three-way collaboration with Google’s TPUs.

• Tech giants are investing heavily in custom silicon and in-house AI chip designs to become independent from Nvidia as demand for inference accelerates and the need for efficient, dedicated computing increases.

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Actions of Broadcom (NASDAQ:AVGO) have been rising along with the rest of the market in recent weeks, and with new highs and a breakout in sight, questions remain about whether it’s time to return to the custom silicon titan, as the benefits of in-house AI chip designs become clearer over time. There is certainly an inference boom on the horizon and, with it, the potential for significant efficiency gains.

Broadcom recently signed new supply agreements with Google, whose parent company is Alphabet (NASDAQ:GOOG) and Anthropic, although it recently expanded its partnership with Metaplatforms (NASDAQ:META) through 2029, the stakes are becoming increasingly clear as companies look to reduce their reliance on NVIDIA (NASDAQ:NVDA) or any other third party, especially as demand for AI continues to increase.

Amid the latest flurry of deals, I think Nvidia’s willingness to spend big to regain power and decline at a time when the GPU giant still doesn’t have enough new AI chips to go around.

READ: The analyst who called NVIDIA in 2010 just named its top 10 AI stocks

Whether it’s the latest votes of confidence from Broadcom’s peers in the mega-cap tech space or Anthropic, which has single-handedly applied considerable pressure to the software scene in recent months, I think it’s clear that there will be no stopping the continued rise of the XPU. Going forward, I think the three-way collaboration with Google and Anthropic is very exciting.

In essence, Google is putting its TPUs (Tensor Processing Units) on the table, while Broadcom is stepping in with its infrastructure expertise to provide the massive 3.5 gigawatts (GW) of computing power for Anthropic’s incredible Claude models. It’s an incredibly ambitious project, to say the least, but with three of the biggest forces in big tech backing it, I’d say such a project is sure to be a tremendous success.

The big issue in providing Anthropic with next-level AI computing won’t be its last, either. At the end of the day, Broadcom stands out as the titan working hard behind the scenes to make these projects a reality. While time will tell how many other frontier model makers are going to launch more gigawatt-scale projects, I think there’s a huge runway, especially as investors become a little more confident that big capital expenditures on AI are much more than just a game of chance.

Broadcom stock has arguably already started to take off, with shares up more than 22% in a month. But whether or not new highs can be reached remains the multibillion-dollar question. There’s no doubt that the recent waves of AI deals have boosted stocks, and although the valuation is starting to rise, bullish Wall Street analysts don’t seem ready to back down.

In fact, the path of least resistance certainly seems higher. But, of course, there are some who think the stock is starting to stretch a little. Jay Goldberg of Seaport Research Partners believes the big Anthropic project will cost Broadcom quite a hefty bill. You are not wrong. But the big question is whether the reduction is justified.

As fun and exciting as Anthropic’s big build is, it may not be long before investors take a step back, take profits and wonder who will have to spend the most on that pursuit and the associated risks. If this is a massive supercycle (and Anthropic has certainly impressed us all with Mythos this month), I think concerns about funding might be a bit overblown, especially since investors are now pouring money back into AI games.

Could Broadcom suffer a small margin hit and cash flow pressures at some point?

Sure, but if you believe in the artificial intelligence revolution and Claude’s heightened computing needs, I think the deal could be the catalyst the stock needs to continue going stronger. Personally, I think Broadcom stock remains one of the best AI bets on the market if it can handle any CapEx-driven volatility.

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