Broadcom's AI-Driven Surge and Its Strategic Alignment with Alphabet's AI Bet

The AI bull market is entering a new phase, driven by hyperscale infrastructure demands and strategic partnerships that redefine industry leadership. At the forefront of this evolution is Broadcom (AVGO), whose recent stock performance-up 47% year-to-date in 2025-reflects its growing influence in the AI ecosystem. This surge is underpinned by a landmark agreement with OpenAI to develop custom AI accelerators for ChatGPT's infrastructure, alongside a deepening collaboration with Alphabet (GOOGL) to supply tensor processing units (TPUs) for Google's AI ambitions. These moves position Broadcom not just as a beneficiary of the AI boom, but as a critical enabler of Alphabet's dominance in the sector.

Strategic Partnerships and Product Innovation

Broadcom's partnership with OpenAI has already catalyzed a 2.33% stock price increase, pushing its share price from $340.50 to $348.43 following the launch of the Brocade Gen 8 Storage-Area-Networking portfolio. This portfolio, featuring quantum-safe encryption and low-latency networking solutions, is tailored for enterprise AI workloads and mission-critical applications. Meanwhile, the company's collaboration with Alphabet has intensified, with Broadcom supplying custom TPUs that now rival Nvidia's GPUs in performance and efficiency. These TPUs are integral to Alphabet's AI infrastructure, powering models like Gemini 3 and solidifying Google's position in the generative AI race.

In June 2025, Broadcom further cemented its infrastructure leadership with the launch of the Tomahawk 6 networking processor, doubling the performance of its predecessor, and the Tomahawk Ultra, designed to interconnect chips in rack-scale AI systems. These innovations align with Alphabet's need for scalable, high-bandwidth solutions to support its expanding AI cloud offerings. Additionally, Broadcom's acquisition of VMware in 2023 has enabled seamless integration of AI and machine learning workloads with enterprise virtualization tools, creating a hybrid cloud ecosystem that supports both NVIDIA and Alphabet-driven AI workflows.

Financial Metrics and Analyst Confidence

Broadcom's financials underscore its appeal as an undervalued AI infrastructure play. Third-quarter fiscal 2025 revenue hit a record $16 billion, with AI-related revenue surging 63% year-over-year to $5.2 billion, driven by a $10 billion AI chip order from hyperscale clients. The company's adjusted EBITDA rose 30% to $10.7 billion, and free cash flow reached $7 billion, reflecting robust operational efficiency. Despite these metrics, Broadcom trades at a price-to-sales ratio of 26.81, significantly lower than peers like NVIDIA (P/S ~45) and AMD (P/S ~30), suggesting potential undervaluation.

Analysts have reinforced this view. Raymond James and Bocom analysts have set price targets of $420 and $425, respectively, citing Broadcom's 23.67% three-year revenue growth and 38.4% EBIT margin as key strengths. Melius Research's Ben Reitzes raised his price target to $475, emphasizing Broadcom's role in Alphabet's AI infrastructure and the broader market's enthusiasm for AI-driven growth.

Strategic Alignment with Alphabet's AI Trajectory

Alphabet's AI advancements, particularly its Gemini 3 model, have become a bellwether for the sector, with Broadcom's stock rising 11.1% in response to Alphabet's AI progress. This alignment is not coincidental: Broadcom's TPUs are now a cornerstone of Google's AI strategy, enabling cost-effective, high-performance computing for large-scale models. As Alphabet invests heavily in AI, Broadcom's role as a supplier of custom silicon ensures it captures a disproportionate share of the value chain.

Moreover, Broadcom's recent collaboration with NEC to enhance VMware Cloud Foundation underscores its ability to bridge private cloud and AI-ready infrastructure, further aligning with Alphabet's hybrid cloud ambitions. This strategic flexibility positions Broadcom to benefit from both public and private AI deployments, a critical advantage as enterprises diversify their AI infrastructure needs.

Conclusion: A Compelling Play on the AI Bull Market

Broadcom's combination of strategic partnerships, product innovation, and financial strength makes it a standout in the AI infrastructure sector. While its P/E and PEG ratios remain unlisted in recent reports according to recent analysis, its revenue growth, margins, and analyst optimism suggest it is undervalued relative to peers. As Alphabet's AI investments accelerate, Broadcom's role as a key supplier and infrastructure enabler ensures it is well-positioned to capitalize on the next phase of the AI bull market. For investors seeking exposure to the AI revolution without overpaying for speculative growth, Broadcom offers a disciplined, high-conviction opportunity.