Broadcom and Nvidia both posted strong earnings.
Broadcom's AI chip division grew 221%, while Nvidia's data center revenue grew 117%.
The article favors Nvidia based on forward valuation.
What happened
Broadcom reported fiscal Q3 results on Sept. 2, with its AI semiconductor division growing 221% year over year to $16.7 billion. Nvidia's data center revenue grew 117% to $89 billion, with overall revenue up 106%.
Why it matters
Both companies are growing fast, but Nvidia faces a risk of losing market share to custom ASIC chips from Broadcom. Broadcom designs purpose-built AI chips for hyperscalers like Alphabet and Meta Platforms, and for labs like Anthropic and OpenAI.
What to watch
The article suggests using 2027 earnings projections for valuation. Nvidia expects 70% growth in its next fiscal year, and the author believes both stocks could rise significantly, with Nvidia potentially doubling.
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Summaries like this, in your inbox every morning.
Broadcom and Nvidia are both benefiting from massive AI spending, but their approaches differ. Nvidia sells broad-purpose GPUs, while Broadcom designs custom ASICs for specific clients. This specialization makes Broadcom attractive to hyperscalers optimizing for cost and performance.
The article notes that Broadcom's AI semiconductor revenue grew 221% year over year to $16.7 billion, while Nvidia's data center revenue grew 117% to $89 billion. Despite Broadcom's faster growth rate, the author favors Nvidia based on forward valuation, suggesting both stocks have significant upside.
Orders for Broadcom's custom chips are ramping up, which could threaten Nvidia's dominance in data centers. However, the article concludes that Nvidia's lower valuation and massive revenue base make it the better investment currently.
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