Alphabet's Projected $205 Billion Capex Can Lift These 3 AI Stocks

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) delivered a solid second-quarter earnings report on Wednesday. Cloud revenue was up by 82% year over year, and the Gemini app reached 950 million monthly active users.

Some investors were spooked when Google's parent company raised its capital expenditures guidance, implying that it will spend up to $205 billion this year, which is likely why the stock slipped by more than 6% in Thursday trading. However, that isn't a problem for these three AI companies, which are poised to benefit from higher data center capital expenditures.

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Cipher Digital

Cipher Digital (NASDAQ: CIFR) builds AI data centers and leases them to hyperscalers like Alphabet. It's a play on the need for electricity to power those massive server clusters, and Cipher Digital can keep its costs lower than neoclouds since it does not provide the chips or software. Tenants must bring those resources themselves.

It's a convenient model for customers that use custom chips. Alphabet has been prioritizing its custom-made Tensor Processing Units (TPUs) for its products and is even offering them to smaller cloud companies, directly competing with Nvidia. Cipher Digital's co-location model offers more flexibility and lower overhead costs than Iren or Nebius, which have both committed to vast Nvidia chip fleets.

Cipher Digital is on target for a 4.2 gigawatt portfolio capacity by 2030, and it's continuing to sign new hyperscaler tenants. While net operating income remains low since it takes time to turn contracts into recognized revenue, Cipher Digital projects substantial growth in its net operating income next year. It's supposed to rise from $86 million to $646 million based on secured contracts that just need AI capacity.

Revenue will also be quite predictable due to the 15-year leases that Cipher Digital has its tenants sign. Alphabet's commitment to higher capital expenditures suggests Cipher Digital's AI data centers are about to get more demand.

Broadcom

Chipmaker Broadcom (NASDAQ: AVGO) is the leading designer of application-specific integrated circuits (ASICs). It collaborates with many tech giants, including Alphabet, on these custom chips. The TPUs Alphabet wants to sell or lease to cloud companies are designed by Broadcom.

Alphabet's decision to make its TPUs an even larger part of its business will directly translate into more sales for Broadcom. That extra demand for chips and the ongoing shortages of AI processors will give Broadcom more leverage to charge higher prices and enhance its margins.

Broadcom is already doing quite well. Revenue increased by 48% year over year in its fiscal 2026 second quarter. Its AI semiconductor business accounted for almost half of its total revenue, and that segment grew by 143% year over year.

Since the AI semiconductor segment continues to make up a larger percentage of total revenue, Broadcom is likely to deliver accelerated revenue growth rates in the upcoming quarters. CEO Hock Tan told investors to expect AI-related semiconductor revenue to "grow over 200% year over year to $16.0 billion." That was before Alphabet revealed its higher capex guidance to investors.

Micron

Micron's (NASDAQ: MU) memory chips and components occupy prominent positions in data center, including within the processors that Broadcom designs. Higher demand for TPUs will benefit Micron as well, but the company's memory also goes into general-purpose data center GPUs like the ones that Nvidia produces.

Even though Micron's stock price has more than tripled this year, it should have more room to rally. In its fiscal 2026 third quarter, evenue more than quadrupled year over year, and management's guidance for $50 billion in fiscal 2026 fourth-quarter revenue would be a meaningful sequential jump from its $41.5 billion in fiscal Q3 revenue.

Continued shortages of memory have helped Micron secure high profit margins for its chips. It's also signing multiyear deals with customers to make future revenue more predictable and minimize the hit it will take when supply catches up with demand and the cycle shifts from the boom phase to the bust phase.

As demand for Alphabet's AI-enabled products grows, the company will need more memory chips. Google Cloud, Gemini, Waymo, and even Google's search engine all rely on these chips to function properly. Higher capital expenditures from tech companies broadly often translate into more sales for Micron.

Marc Guberti has positions in Broadcom, Cipher Mining, and Iren. The Motley Fool has positions in and recommends Alphabet, Broadcom, Micron Technology, and Nvidia. The Motley Fool has a disclosure policy.