Jefferies: Alphabet’s big capex plan brightens Broadcom’s AI outlook; analyst sees ~60% upside

Jefferies frames Alphabet’s materially higher 2026 capital‑expenditure guidance as validation that hyperscalers are accelerating AI infrastructure investments, which should grow the addressable market for high‑performance accelerators and networking silicon suppliers such as Broadcom. The bank reiterated a Buy on Broadcom and published a price objective implying roughly 60–62% upside from recent share levels, driven by a bottom‑up demand model and assumed market share gains. Key to Jefferies’ uplift is a scenario that anticipates a near‑term build of about six million server‑accelerator units in a Google deployment window; the firm expects Broadcom to capture roughly 85–90% of that initial volume based on its higher‑performance SKU and integration advantages versus at least one rival (the analyst cites MediaTek in comparisons). Jefferies warns that converting early design wins into revenue depends on supply‑chain execution — substrate availability, advanced‑node wafer allocation, and packaging and test throughput are potential bottlenecks that could slow ramp timing. The note also situates the company view inside broader market signals: foundry and upstream suppliers have signaled stepped‑up orders and capacity plans, while industry moves to onshore more capacity are tightening the supply picture. Market reaction to Alphabet’s guidance has been mixed — some investors treated the heavier capex range as a timing and efficiency risk, with broader skepticism about upfront fixed costs and the pace of returns. Additional context from contemporaneous reporting highlights Alphabet’s strategic moves (including a reported roughly $4.75 billion data‑center operator acquisition and heightened scrutiny around other capital allocations like Waymo fundraising activity), which amplify investor focus on capex intensity. Jefferies acknowledges competitive dynamics that limit a sweeping displacement of GPUs — Nvidia’s ecosystem remains dominant for many workloads — and notes risks from hyperscalers developing in‑house silicon and rival ASIC design wins. The analyst’s bullish case assumes hyperscalers execute near the top of their guidance ranges; investors should monitor SKU adoption rates, early build schedules, vendor bill‑of‑materials shares in new systems, and whether packaging/test throughput and permitting or grid constraints delay data‑center builds. Overall the update tightens the link between hyperscaler capex signals and semiconductor supplier valuations while flagging execution and timing risks that could temper near‑term realization of the modeled upside.