Broadcom's AI semiconductor revenue grew far faster than Nvidia's data center business in each company's latest earnings report, though Nvidia's business remains larger in absolute terms. Motley Fool analyst Keithen Drury argues a forward-earnings comparison points to Nvidia as the better buy, even as Broadcom's custom-chip strategy gains ground with hyperscalers.
Broadcom's AI chip growth outpaces Nvidia's
Broadcom reported its fiscal third-quarter results on Sept. 2, and its AI semiconductor division grew 221% year over year to $16.7 billion. The company's overall revenue rose 86%. Nvidia, by contrast, posted data center revenue growth of 117% to $89 billion, with total revenue up 106% year over year.
Nvidia builds general-purpose GPUs suited to nearly any parallel-processing workload. Broadcom instead designs application-specific integrated circuits (ASICs) built for narrow AI tasks, and it has partnered with hyperscalers Alphabet and Meta Platforms, plus AI labs Anthropic and OpenAI, on custom chip orders that are starting to ramp up.
Next year's growth targets diverge
Nvidia told investors it expects 70% revenue growth in its next fiscal year, while Broadcom has long touted the growth it expects in 2027 as orders for its custom AI chips ramp up. Drury notes that both stocks trade below 20 times next year's earnings, leaving room for either to re-rate.
Valuation gap favors Nvidia, analyst says
Drury argues that a 30 times forward earnings valuation would better fit the pace of growth at both companies. On that basis, he estimates Nvidia's stock could double. He puts Broadcom's upside at more than 50%.
He also suggests hyperscalers may increasingly favor data centers with a higher share of Broadcom's custom chips, a shift that in his view leaves Nvidia at higher risk of losing market share to custom silicon than Broadcom faces of losing share to Nvidia.
Source: The Motley Fool
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