Explained — Why Nvidia, Broadcom shares rose after Alphabet's capex announcement

Shares of Broadcom Inc. and Nvidia Corp. rose in extended trading on Wednesday, February 4, following Google-parent Alphabet's earnings announcement, which included higher artificial intelligence capital expenditure.

Shares of Broadcom and Nvidia, both of which fell between 3% to 4% in regular trading on Wednesday, surged 6% and 2.5% respectively after the capex announcement.

Alphabet on Wednesday announced plans to extend its capex up to $185 billion

this year, nearly double the amount spent last year.

Following the earnings release, Melius Research's head of technology research, Ben Reitzes told CNBC that the capex spend would be a boon for Broadcom and other names tied to Alphabet.

Reitzes said, “That is an incredible number. We are laughing because that number is so good for the Google cohort.”

Alphabet is one of several technology firms ramping up capital expenditure as they expand data center capacity to support artificial intelligence workloads.

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Unlike many peers that rely heavily on industry-standard Nvidia processors, much of Google’s AI software runs on its in-house TPUs. The company’s latest flagship model, Gemini 3, was trained using these proprietary chips. Broadcom works with Google on the design and manufacturing of its TPUs.

Broadcom has been scaling up its custom chip business focused on application-specific integrated circuits, or ASICs, which some experts say can be better suited for certain artificial intelligence workloads. In December, the company said it would sell Google’s TPU Ironwood rack systems to Anthropic, another artificial intelligence lab.

Industry experts believe custom AI chips are useful for the largest and most sophisticated technology firms, often referred to as hyperscalers. Broadcom refers to the custom chips it is currently developing for five different customers as “XPUs.”

Alongside Google’s TPUs, Microsoft, Amazon and Meta are also working on their own in-house chips, though Broadcom has not identified customers other than Google and Anthropic.

Hyperscalers usually rely on a semiconductor partner such as Broadcom to provide critical intellectual property and support manufacturing. Alphabe also continues to use Nvidia chips, which led to a 2% rise in the stock in extended trading.

Reitzes said, “It’s probably good for Nvidia too because they are going to spread the love, not just their own TPU but also to Nvidia.”