Google and Meta Just Rewrote Broadcom’s AI Story—While Shares Drop

Key Points

• Artificial intelligence semiconductor leader Broadcom has seen a big-time drop in its share price since December.
• At the same time, some of the firm's largest customers plan to ramp up their AI spending much more than anticipated.
• Together, these dynamics provide significant support to the outlook on Broadcom shares.

Early in 2026, shares of semiconductor giant Broadcom NASDAQ: AVGO are continuing on their negative trajectory that characterized the end of 2025. As of the Feb. 5 close, AVGO stock has fallen 10% on the year. Overall, shares are now down 23% since the company last reported earnings on Dec. 11, 2025. However, the outlooks provided by key U.S. hyperscalers make this drop in shares look like an opportunity.

With hyperscaler capital expenditure (CapEx) guidance coming in much higher than anticipated, Broadcom’s future looks bright amid the sell-off. 

Broadcom’s Top Customer Blows CapEx Forecasts Out of the Water

Hyperscaler CapEx is a key indicator of Broadcom’s future, providing an approximation of the company’s opportunity to generate artificial intelligence semiconductor revenue. Take the firm that is well-known to be Broadcom’s largest chip partner, Google parent company Alphabet NASDAQ: GOOG. Alphabet reported earnings on Feb. 4, and provided its 2026 CapEx guidance. In the year, it expects to spend between $175 billion and $185 billion on CapEx. At the midpoint, this would mark an approximately 97% increase versus the firm’s 2025 CapEx of $91.4 billion. This is important for multiple reasons.

First off, CapEx guidance massively exceeded expectations near $120 billion, which implied spending growth of just 31%. Given that expectations for Broadcom’s revenue growth are substantially anchored to Google’s CapEx, higher-than-expected spending should also push Broadcom's revenue estimates up.

Additionally, in 2025, Google’s CapEx rose by 74% from $52.5 billion in 2024. By indicating a 97% increase in 2026, the company is clearly showing that its AI spending growth is accelerating. This is great news for Broadcom, one of the market’s top beneficiaries of Google’s AI spending.

Notably, Broadcom shares rose by approximately 1% on Feb. 5, one day after Google’s earnings release, as investors took notice of this relationship. Still, this gain is a drop in the bucket compared to the steep downward decline in AVGO shares over recent months.

META’s CapEx Comes in Hot, Signals Increasing Use of MTIA

CapEx guidance provided by Meta Platforms NASDAQ: META adds further weight to the bullish case around Broadcom. Although their relationship has not been officially confirmed, it is widely believed that Meta also has a large partnership with Broadcom. This comes through Broadcom’s co-development of the company’s Meta Training and Inference Accelerator (MTIA).

In its latest earnings, Meta said it expects to spend between $115 billion and $135 billion on CapEx in 2026. This solidly exceeded expectations of around $110 billion. At the midpoint, Meta’s guidance implies CapEx growth of 73%. This would be a deceleration from 84% growth in 2025, but not a massive one. This growth rate is still very high, providing support for Broadcom’s outlook. Furthermore, it’s possible that Broadcom could receive a greater share of Meta’s spending in 2025 than it has in the past.

In Q1 2026, Meta said it will “extend our MTIA program to support our core ranking and recommendation training workloads in addition to the inference workloads it currently runs." Thus, the firm plans to start using MTIA for model training going forward, not just inference.

For Broadcom, this is a clear positive sign, implying that Meta will increase its demand for MTIA as it extends the chip’s use-cases. The statement also signals that MTIA is becoming a more strategically important asset to Meta. This is a strong, long-term indicator for Broadcom, increasing the likelihood that Meta will continue to co-develop chips with the firm for years to come. For reference, Google is currently deploying the seventh generation of its Broadcom co-developed tensor processing units (TPUs). Meanwhile, Meta has only deployed the second generation of MTIA.

Broadcom’s Outlook Improves as Shares Fall

Overall, these developments provide significant support to the bullish case on Broadcom shares. This news comes at a time when Broadcom shares are trading at a forward price to earnings (P/E) ratio near 30x.

This is around 19% below the stock’s average forward P/E during the past 52 weeks. Furthermore, the consensus price target on Broadcom is near $437, implying around 41% upside potential. Considering all this, Broadcom shares look like an enticing proposition at current levels.