Broadcom Inc (AVGO  ) announced on Monday that it had inked long-term, multi-year agreements with Alphabet Inc's (GOOG  ) (GOOGL  ) Google to develop and supply Tensor Processing Units (TPUs) and networking components. This extends the collaboration of these two tech majors into 2031. The deal includes the supply of 3.5GW (gigawatts) of TPU-based AI compute capacity to AI startup Anthropic, starting in 2027.

The deals significantly increase Broadcom's visibility "as a longer-term main design partner for the TPU," according to BofA Securities analyst Vivek Arya.

The Broadcom Analyst: Arya maintained a Buy rating and price target of $450.

The Broadcom Thesis: The latest deal solidifies the company's role as the main TPU design partner for Google, which had been to insource (COT) or diversify to other partners, such as MediaTek, Arya said in the note.

The stock's current valuation does not reflect Broadcom's "well-proven AI model," he added.

The company is offering 3.5GW to Anthropic in the range of $10-$15 billion per GW, with the agreement totaling around $35 billion, the analyst stated. This is lower than Advanced Micro Devices Inc's (AMD  ) around $15-$20 billion per GW and Nvidia Corp's (NVDA  ) $25-$30 billion per GW, since Broadcom "provides just accelerator chips (instead of systems) and networking switches, and does not provide CPUs or NIC," he wrote.

Broadcom should be able to generate earnings of more than $30 per share by 2030 with its custom ASIC programs providing multi-year visibility and its networking gaining more traction, Arya said.

Broadcom could potentially ramp up offerings to other customers, such as Meta Platforms Inc (META  ), OpenAI and Apple Inc (AAPL  ), he further mentioned.

AVGO Price Action: Shares of Broadcom had risen by 3.66% to $325.94 at the time of publication on Tuesday.