An analyst expects a sharp increase in Google's AI spending. He named three stocks that stand to benefit

Investors looking for opportunities to profit from artificial intelligence during the upcoming earnings season should pay attention to the companies benefiting from Google Cloud’s strong growth, according to MarketWatch. According to Ben Raitzes, an analyst at Melius Research, these are primarily chip and networking equipment manufacturers that build the infrastructure for Google’s data centers.

A Melius analyst expects Google’s cloud business to post another strong quarter, which will likely prompt Alphabet to increase its infrastructure spending plans. “The company will have to spend more on its models and expand its cloud capacity to continue raising its forecasts,” the strategist explains. According to Melius’s estimates, developing AI infrastructure will cost the tech giant $352 billion in 2027—a 75% increase over projected spending in 2026.

This could work in Broadcom’s favor, as the company develops specialized TPU chips for Google. Since the beginning of the year, the company’s stock has fallen 27% amid concerns that Google is bringing in other suppliers to manufacture TPUs. But Wrightzes believes that any potential negative consequences are already factored into the stock price, and the risk-reward ratio is becoming increasingly attractive. The analyst has set a target price of $610 for Broadcom shares, which implies growth of more than 70%.

Melius believes that Broadcom’s revenue from semiconductor sales to Google will continue to grow through 2031. In addition, in the second half of the decade, the chipmaker will have a major opportunity to collaborate with companies such as OpenAI and Anthropic. Anthropic is currently actively using the same TPUs from Google, but, according to Wrightzes, it may develop its own specialized chip in collaboration with Broadcom to avoid paying a markup. The analyst believes this option would also be more profitable for Broadcom.

Another company that Wrightzes named among the beneficiaries is Marvell. In August, it entered into a partnership with Google to jointly develop specialized chips. In addition, Marvell granted Google a warrant—the right to purchase up to $12.2 billion worth of its shares. The target price set by Melius for Marvell’s stock is 67% higher than the current market price.

The analyst also sees significant potential in the networking equipment sector: Among the companies Melius tracks, Arista—which supplies high-speed network switches and software for connecting chips—will benefit the most from increased spending by Google. Its clients include both Google and Anthropic. Based on Melius’s price target of $275, Arista’s stock could rise by 31%.

Reitzes’s recommendation on Alphabet stock remains at a neutral “hold.” The stock may rise slightly by the end of the year, but the reason it is underperforming the market is that the long-term growth rate of search remains unclear, and the Gemini 4 AI model is not causing significant harm to Anthropic and OpenAI, the analyst warned.

This article was AI-translated and verified by a human editor