Broadcom’s Long-Term Google TPU Deal Is Bigger Than It Looks for AI Infrastructure

Broadcom (NASDAQ:AVGO) rose 3.65% in a.m. trading on Tuesday after announcing a long-term agreement with Alphabet (NASDAQ:GOOGL) to design and supply custom Tensor Processing Units (TPUs) and networking components for Google’s AI racks through 2031.

The deal also pulls in Anthropic, granting the AI startup access to approximately 3.5 gigawatts of next-generation TPU-based AI compute starting in 2027. The multi-year structure extends revenue visibility well beyond typical semiconductor cycles, making it more significant than the headline number alone suggests.

Tensor Processing Units are custom-designed chips built for the matrix math powering AI model training and inference. Unlike Nvidia’s general-purpose GPUs, TPUs are architected around a single customer’s workload, delivering better performance per watt at scale. As CEO Hock Tan noted on the Q4 FY2025 earnings call, “you can put in hardware what if you use a general-purpose GPU you can only do in software and kernels in software. You can achieve performance-wise so much better in the custom-purpose design hardware-driven XPU.” Google pioneered the TPU model, and Broadcom has been its primary design and supply partner across multiple generations.

Broadcom’s AI revenue trajectory has accelerated sharply: $4.4 billion in Q2 FY2025, $5.2 billion in Q3, roughly $6.2 billion in Q4, and $8.4 billion in Q1 FY2026, up 106% year-over-year. Guidance for Q2 FY2026 calls for $10.7 billion in AI semiconductor revenue. The company is targeting $100 billion in AI chip revenue by 2027, a goal that depends heavily on sustained Google TPU volumes. Tan confirmed the growth path on the Q1 call: “Our AI revenue growth is accelerating, and we expect AI semiconductor revenue to be $10.7 billion in Q2.”

This partnership is one of the most consequential custom silicon relationships in AI infrastructure. As we noted in today’s Daily Profit newsletter, Broadcom and Google’s AI chip collaboration carries long-term strategic weight for the broader semiconductor landscape. Google’s $175 billion to $185 billion 2026 capital expenditure plan provides a direct demand pipeline into Broadcom’s order book. Broadcom already holds a $73 billion AI backlog across XPUs, switches, DSPs, and optical components, scheduled for delivery over the next 18 months.

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Anthropic’s inclusion deepens the commercial logic. The AI startup’s annual revenue run rate has surpassed $30 billion, and it already placed a $10 billion order for TPU Ironwood racks in Q3 2025, followed by an additional $11 billion order in Q4 for late 2026 delivery. Broadcom’s role as the hardware layer beneath both Google’s Gemini and Anthropic’s Claude positions it as a structural beneficiary regardless of which AI model wins market share.

Broadcom recently named Amie Thuener, Google’s former Chief Accounting Officer, as its incoming CFO, effective June 12, 2026. The hire signals confidence in sustained AI-driven growth and the need for finance leadership with direct experience in large-scale AI transactions.

Broadcom shares have gained 116.67% over the past year, with the stock trading at a forward P/E of 28x against a consensus analyst price target of $471.55, with 48 buy ratings and zero sell ratings. The 2031 deal horizon converts customer-concentrated risk into a visible, contracted revenue stream. Investors should watch Q2 FY2026 results for confirmation that AI revenue hits the $10.7 billion guided figure and whether Google’s CapEx pace holds through mid-year.

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