Burning cash to attack AI scares down Alphabet Inc. Class C (GOOGL.US) stock price, but ignites the semiconductor ecosystem: NVIDIA Corporation (NVDA.US) and Broadcom Inc. (AVGO.US) benefit the most?

Alphabet Inc. Class C (GOOGL.US) is increasing its capital expenditure on an unprecedented scale in order to establish a leading position in the field of Artificial Intelligence (AI). The company recently announced quarterly revenue that exceeded market expectations and unveiled a massive capital expenditure plan far surpassing analyst predictions. The plan is aimed at extensive construction of data centers and infrastructure to gain a competitive advantage in the AI era. Alphabet Inc. Class C stated that this year's capital expenditure will amount to $185 billion, significantly higher than the prior estimate of $119.5 billion by analysts. According to compiled data, its fourth-quarter revenue, excluding partner revenue share, reached $97.23 billion, surpassing the average expectation of $95.2 billion. Of particular note is that the expected total expenditure by 2026 will exceed the total capital expenditure of the past three years for this internet search giant. CEO Sundar Pichai emphasized the importance of these investments to investors, stating in a statement on Wednesday, "We see AI investments and infrastructure driving revenue and growth across the board. Search engine usage is at an all-time high, and AI is driving expansive growth." Despite Pichai's repeated emphasis on the importance of AI investments, this news still shocked Wall Street. As of pre-market trading on Thursday, Alphabet Inc. Class C shares fell over 4%. Semiconductor supply chain emerges as the biggest winner While investors digest this decision, the market expects that the substantial funds from Alphabet Inc. Class C will flow into multiple partner companies, bringing about development dividends. Stocks like NVIDIA Corporation (NVDA.US) and Broadcom Inc. (AVGO.US) have seen gains as a result. According to Alphabet Inc. Class C's plans, around 60% of the capital expenditure will be used for short-term assets including TPUs and GPUs. While the specific allocation proportions have not been disclosed, the company's massive procurement scale has been enough to drive partner stock prices upward. Broadcom Inc. is seen as the most direct beneficiary. As the primary design and manufacturing partner for Alphabet Inc. Class C's custom TPUs, the company has a very close business relationship with Alphabet Inc. Class C. Bank of America Corp. pointed out that Alphabet Inc. Class C's project could account for over 80% of Broadcom Inc.'s AI computing sales. Boosted by this news, Broadcom Inc.'s stock surged by over 5% in pre-market trading. However, analysts at JPMorgan noted that MediaTek is expected to secure 30%-40% market share of Alphabet Inc. Class C's TPU chips in the long term, indicating that Broadcom Inc. is not the exclusive supplier, and the future competitive landscape warrants attention. NVIDIA Corporation also received significant positive news. Despite Alphabet Inc. Class C's strong promotion of its in-house TPUs, CEO Sundar Pichai explicitly stated during the earnings call that the company offers a wide range of computational choices for customers, including its in-house seventh generation Ironwood TPU and the latest NVIDIA Corporation GPU. This indicates that NVIDIA Corporation's GPUs remain an important option within Alphabet Inc. Class C's cloud platform. The stock also rose by over 2% after the announcement. Additionally, AMD (AMD.US), another semiconductor company with a collaborative relationship with Alphabet Inc. Class C in cloud computing and AI chips, is also considered a potential beneficiary by the market. Apart from the core chip design companies, upstream hardware manufacturers and component suppliers are also involved in this wave of capital spending. Celestica Inc. (CLS.US) is the assembler of Alphabet Inc. Class C's TPU servers. Although there were previous reports that the new version of TPU servers might be assembled by other suppliers, resulting in pressure on its stock price, Alphabet Inc. Class C's substantial investment plan has reignited market confidence in its business, with its stock rebounding by over 6% in pre-market trading. Lumentum (LITE.US) is a key supplier of optical interconnect components for data centers, and its business is directly related to the scale of data center construction. While its stock experienced fluctuations in pre-market trading following the announcement, the expansion of data center infrastructure will undoubtedly increase the demand for its products in the long term.