Key Points
Broadcom’s specialized AI chips differentiate it from Nvidia and have garnered demand from the largest tech companies.
Micron’s memory storage chips are small components within AI chips, and it has become integral for AI inference.
Alphabet has multiple businesses that are benefiting from AI, with Google Cloud driving the company’s recent growth.
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1. Broadcom’s customized chips have helped it establish a niche in the red-hot AI chip boom
When most people think about AI chips, they think of Nvidia, which offers chips that can handle a wide range of tasks. These are one-size-fits-all semiconductors that any tech company can use. These chips are known as GPUs (graphics processing units), and it’s the market segment where Nvidia dominates, but Broadcom (NASDAQ: AVGO) has carved a market for its chips by customizing them.
Broadcom specializes in application-specific integrated circuits (ASICs). Some tech giants have specific objectives that require more than GPUs, and a custom-made chip for their goals can lead to greater efficiencies and cost reduction.
For instance, Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) and Meta Platforms (NASDAQ: META) have both been aggressively buying Nvidia chips. However, these same companies turn to Broadcom for their custom-designed chips, the Tensor Processing Units and Meta Training and Inference Accelerator chips, respectively.
Broadcom is the second-largest U.S. chipmaker by market cap, and a 74% year-over-year increase in Broadcom’s fourth-quarter AI semiconductor revenue suggests that it will maintain its lead over the competition.
2. Micron’s memory storage solutions improve AI inference and act as a backbone for semiconductors
AI chipmakers use several components to produce high-performing semiconductors. Nvidia, Broadcom, and Advanced Micro Devices (NASDAQ: AMD) are some of the many semiconductor giants that work closely with Micron (NASDAQ: MU) for high-bandwidth memory chips. It’s essentially a chip within a chip, and each time Nvidia, Broadcom, or Advanced Micro Devices sells an AI chip, it boosts the demand for Micron’s products.
Micron is shifting away from consumer products to fully capitalize on the AI opportunity, which offers higher margins. This pivot to AI infrastructure explains why Micron’s revenue almost tripled year over year in the second quarter of fiscal 2026 — the quarter ended Feb. 26, 2026 — with sales up 75% from the previous quarter.
Micron’s guidance for the current quarter is for $33.5 billion (plus or minus $750 million), which would be a 40% bump from last quarter at the $33.5 billion. The stock has remained an undervalued AI gem for too long, and once investors noticed, they took shares up by more than 500% over the past year.
Despite that growth, Micron still looks undervalued with a forward P/E ratio around 7 and a 0.24 PEG ratio. It’s growing much faster than Nvidia, which has a 23 forward P/E ratio and a 0.77 PEG ratio.
3. Alphabet’s cloud platform powers the software side of the AI boom
Alphabet has multiple avenues to tap into AI. Google’s Gemini shows up in Google search results more often, giving Google’s AI model incredible exposure. That may partially explain why Gemini is already up to 750 million monthly active users. Alphabet also uses AI to enhance its online advertising revenue, and it’s even using physical AI through Waymo, its fleet of self-driving vehicles.
However, the biggest opportunity within the Alphabet conglomerate may be Google Cloud. This cloud computing platform took more than a decade to become profitable, but it has now turned into the biggest catalyst for Alphabet’s financial results.
Since AI inference requires substantial computing power, more companies are turning to cloud providers like Alphabet. For instance, OpenAI and Anthropic are both Google Cloud customers, and the tech giant has a bunch of other corporate leaders using its cloud computing platform.
Google Cloud revenue surged by 48% year over year in Q4, with the company citing “enterprise AI infrastructure and enterprise AI Solutions” as major catalysts for cloud revenue growth. Google Cloud also brought in $5.3 billion in net operating income in Q4, more than doubling year over year.
This growth gives Alphabet more capital to invest in moonshot opportunities like Waymo. Its access to substantial capital gives it the flexibility to create small start-ups within the conglomerate that can become significant growth drivers in the future. This business model has been enough to crush the S&P 500, with Alphabet shares up by 176% over the past five years.
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Marc Guberti has positions in Broadcom. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Broadcom, Meta Platforms, Micron Technology, and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
