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Investing.com -- Broadcom (NASDAQ:AVGO) stock surged 10% Monday, riding a wave of optimism surrounding Google’s artificial intelligence advancements. Other Google suppliers also saw significant gains, with Lumentum (NASDAQ:LITE) jumping 13.5% and Celestica (NYSE:CLS) rising 12%.
The rally comes as Google parent Alphabet (NASDAQ:GOOGL) climbed 5% amid growing investor confidence in the company’s AI capabilities following recent updates to its Gemini model. Google’s success is particularly significant for Broadcom, which has partnered with the tech giant since 2016 to develop Tensor Processing Units (TPUs), now in their seventh generation.
These custom AI chips have become increasingly important as Google’s Gemini 3 model, primarily trained on TPUs, demonstrates competitive advantages. Analysts note that Google’s early investment in custom chip development is now paying dividends, potentially giving the company a price advantage in AI processing.
The market movement reflects growing recognition of Broadcom’s strategic position as a key supplier for Google’s AI infrastructure. The TPU partnership represents a significant revenue stream for Broadcom as Google Cloud continues to expand its AI capabilities.
However, Mizuho analyst Jordan Klein noted some caution in recent trading patterns, observing that "rotation into GOOG from MSFT, NVDA, META and AMZN feels like could continue as every day more substack articles on how great new Gemini 3 is and what a big lead it now has over Claude, GPT and other models."
Melius analyst Ben Reitzes highlighted the importance of Google’s TPU momentum, stating, "Outside of the Nvidia GPU for AI workloads, the TPU is the most proven AI chip out there - and now it has the most tangible momentum. The decision to develop this product early is now starting to inflect to the upside - delivering for both Broadcom’s AI revenues and Google Cloud (GCP) growth."
The market appears to be reassessing supplier relationships in the AI space, with Google’s suppliers benefiting from the company’s recent AI advances and vertical integration strategy.