Broadcom and AMD have both outpaced the S&P 500 this year on booming AI chip demand, but their latest earnings point in different directions. AMD is growing revenue faster today, while Broadcom's guidance and valuation give it the edge looking ahead.
Shares of Broadcom dropped 5.94% to $392.99 on the day, while AMD stock climbed 6.5% to $514.39. Both companies make custom AI hardware, but Broadcom builds ASICs for large tech customers, and AMD sells GPUs and CPUs.
AMD grows faster, but Broadcom guides higher
AMD posted 50% year-over-year revenue growth in its second quarter, ended June 27. Broadcom's sales rose 48% year over year in its fiscal second quarter, ended May 3. AMD currently has a slight edge, but Broadcom's outlook suggests it will overtake AMD in coming quarters.
AI semiconductor sales made up slightly less than half of Broadcom's revenue and more than doubled year over year. Broadcom expects that segment to more than triple year over year next quarter, and CFO Kirsten Spears told investors to expect 84% year-over-year revenue growth in that period. AMD, meanwhile, more than doubled its data center revenue year over year — a segment that accounts for 58% of its total revenue — and its guidance implies 41% year-over-year revenue growth next quarter.
Rising CPU demand could favor AMD
The shift toward agentic AI is increasing demand for CPUs, which support the GPUs that process AI workloads. Training models has typically required one CPU for every eight GPUs, but that ratio may move toward one CPU per GPU as agentic AI spreads. Red Hat, an IBM company, said the ratio could shift to four CPUs per GPU in certain agentic deployments. Since Broadcom doesn't sell CPUs, this trend benefits AMD instead. Grand View Research projects a 46.2% CAGR for the enterprise agentic AI market, a tailwind for AMD's CPU business.
Broadcom holds the valuation edge
Broadcom trades at a 70 P/E ratio compared to AMD's 120, and at a 0.47 PEG ratio versus AMD's 1.01. Broadcom's profit margin also stands well ahead of AMD's: a 42% net margin against AMD's 19.9%. Those figures suggest Broadcom carries less risk at current levels, even as AMD's CPU exposure gives it a longer-term growth argument.
Source: The Motley Fool
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