Broadcom vs. Nvidia: 1 Metric Shows Which Artificial Intelligence (AI) Chipmaker Is the Better Bargain
- NVDA
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Nvidia (NASDAQ: NVDA) and Broadcom (NASDAQ: AVGO) are two of the biggest names in the artificial intelligence (AI) chip world. Nvidia holds the crown as the largest company in the world, with a market cap of almost $5.5 trillion, while Broadcom is the seventh largest with a $1.9 trillion valuation. But which one of these two is actually the better bargain for stock investors right now?
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
Broadcom has a major catalyst arriving in 2027
Nvidia became the world’s largest company thanks to extreme demand for its graphics processing units (GPUs). Nvidia’s GPUs are widely recognized as best in class, and their performance is further boosted by Nvidia’s ecosystem, which includes software and networking solutions. Nvidia’s products are utilized by every AI hyperscaler and have become the industry standard for AI training and inference.
However, in specific applications, most of a GPU’s wide-ranging capabilities are wasted. So, some AI hyperscalers are developing custom AI chips that are suitable only for narrow workloads. However, the AI hyperscalers don’t have the expertise necessary to design and manufacture computing chips. To solve that issue, they’ve partnered with companies like Broadcom, which are using their networking-world design expertise to develop optimized AI chips for clients. These chips are known as ASICs — application-specific integrated circuits. ASICs are nothing new, but they’ve only recently been deployed in AI settings to optimize performance.
In this context, ASICs are often referred to as custom AI chips, and there are a handful of examples of their success. Broadcom’s largest client has been Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), which partnered with Broadcom to design the Tensor Processing Unit (TPU). TPUs are widely recognized as a strong competitor to Nvidia’s products, and Alphabet is also starting to sell TPUs directly to certain clients because they are more cost effective than GPUs in the right applications.
Alphabet’s success with TPUs has inspired other AI companies to partner with Broadcom to launch their own chips, and most of these products are now reaching production. Broadcom expects to realize over $100 billion in AI semiconductor sales next year, fueled by new orders. For reference, Broadcom’s AI semiconductor revenue during the second quarter was $10.8 billion — just over $40 billion annualized. That’s a lot of growth coming up in the next year, but does that make it a better bargain than Nvidia?
