Broadcom Rallies 6% to Challenge Magnificent Seven Dominance on Wall Street

The US semiconductor giant counts Alphabet as a key partner, and the recent announcement by the Google parent company to spend as much as $185 billion on capital expenditures prompted a 6% rally for Broadcom (NASDAQ: AVGO).

Alphabet’s (NASDAQ: GOOGL) intentions for AI spending helped to push Broadcom’s market capitalization beyond $1.52 trillion, pushing the stock above the likes of Tesla (NASDAQ: TSLA) and to within touching distance of Meta Platforms (NASDAQ: META).

Broadcom enjoyed a strong 2025, ending the calendar year more than 51% higher, far outpacing the S&P 500’s growth of 17.9% over the same period.

Google Pushes AVGO Higher

Although Alphabet’s $185 billion intentions for capital expenditures didn’t prompt a significant rally for GOOGL, investor optimism surrounding the firm’s constellation of peers grew significantly, with Ben Reitzes, head of technology research at Melius Research, suggesting that the capex spend would be a boon for Broadcom and other AI partners.

Google has strong ambitions for building data centers focused on artificial intelligence over the coming years. Because Google decided against running on industry-standard Nvidia chips, this increase in spending is set to play directly into the hands of NVDA’s semiconductor rivals.

Broadcom forms an integral part of the development of Google’s AI models, and the tech firm’s state-of-the-art Gemini 3 model was trained on Tensor Processing Units (TPUs), which are created with the help of the semiconductor specialists.

This isn’t to say that Broadcom isn’t a strong stock in its own right. The company confirmed that it will report its highly-anticipated Q1 2026 results on March 4, and upticks in AI-related order momentum throughout the semiconductor sector mean that investors will see this earnings report as a pivotal moment for AVGO’s long-term trajectory.

Broadcom has generated $64 billion in revenue over the last twelve months, which points to an expansion in software subscriptions and demand for AI connectivity and custom silicon.

The same period saw the stock’s operating income rise to $26 billion, with operating margins close to 41%, highlighting Broadcom’s strength in R&D, as well as acquisitions and shareholder returns.

Strength in Bespoke Chips

Although Nvidia is a clear market leader when it comes to AI computing chips and their sales volumes, Broadcom has developed a strong USP that’s won business from Google and is turning the heads of many more ambitious firms seeking to boost their artificial intelligence adoption.

Rather than attempting to match Nvidia stride-for-stride, Broadcom has instead focused on developing custom AI chips in direct collaboration with each AI hyperscaler.

Although this strategy isn’t new in the computer chip ecosystem, Broadcom is the first major company to adopt the approach for AI workloads, and it’s helping to deliver high levels of demand among clients.

This USP has caused Broadcom’s revenue to rally 74% to $6.5 billion in Q4 2025. For the first quarter this year, the company expects its rate of revenue growth to reach $8.2 billion.

AI Growing Pains Remain

Although Broadcom is a stock that possesses plenty of potential, it’s also experiencing growing pains in a wildly competitive artificial intelligence landscape.

AVGO has slipped more than 23% from its early December peak value of $413 as investors became wary of booming demand for custom AI processors bringing lower gross margins than Broadcom’s legacy silicon businesses.

Broadcom’s large AI order book, which consists of a $73 billion backlog, could risk underpinning growth while producing short-term margin pressure as the firm reallocates resources towards producing more custom chips.

These concerns made December a prime month for profit-taking among investors. Looking ahead, the direction that the artificial intelligence boom will take in 2026 remains unclear, with more institutions increasing their hedges against the prospect of an AI bubble.

While Broadcom’s chips carry a highly sought-after USP in a rapidly growing AI industry, many investors will be looking ahead to the firm’s earnings report on March 2 for an indication of whether AVGO is in a position to shrug off these lingering concerns.

Can AVGO Challenge the Magnificent Seven?

Broadcom has already infiltrated the Magnificent Seven on Wall Street, nestling between the likes of Tesla and Meta Platforms in terms of market capitalization.

Given that the firm has a genuine competitive advantage over semiconductor rivals Nvidia and an expansive order sheet, it’s clear that Broadcom has the potential to continue growing its value significantly in 2026.

However, with December sell-offs still fresh in the memory, Broadcom’s trajectory will become clearer following its fiscal first-quarter results in March. Any evidence that the firm can deliver on its lofty growth ambitions will form a springboard for a stock that has plenty to offer in the AI sector.