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    Better AI Chip Stock: AMD vs. Broadcom

    techgeekwireBy No Comments3 Mins Read

    { “title”: “Better AI Chip Stock: AMD vs. Broadcom”, “description”: “An analysis of Advanced Micro Devices (AMD) and Broadcom as potential investments in the AI chip market, comparing their strategies and prospects against Nvidia.”, “tags”: “Nvidia, Broadcom, AMD, AI chips, stock analysis”, “rewritten_content”: “## Better AI Chip Stock: AMD vs. Broadcom When it comes to artificial intelligence (AI) chip stocks, Nvidia (NASDAQ: NVDA) is the undisputed leader, according to many market analysts. But that doesn’t mean there aren’t other companies vying to steal some of Nvidia’s market share. Two prominent contenders are Advanced Micro Devices (NASDAQ: AMD) and Broadcom (NASDAQ: AVGO). Let’s take a closer look at these two companies to determine which might be the better investment in the rapidly growing AI infrastructure market.

    The AI Infrastructure Market

    A computer chip with the letters AI on it
    Broadcom, in contrast, doesn’t manufacture GPUs or CPUs. Instead, it focuses on the AI infrastructure market by helping customers develop custom AI chips known as ASICs (application-specific integrated circuits). While these custom chips lack the flexibility of GPUs and take more time and money to develop, they can outperform GPUs for specific tasks and consume less power. The company also participates in the networking side of AI infrastructure, producing components like Ethernet switches and network interface cards (NICs). These components are essential for managing data flow and distributing AI workloads across servers. Broadcom’s biggest opportunity lies in the custom AI chip market. The company currently has seven AI chip customers at different stages of development. Based on the progress of its three most advanced customers, Broadcom anticipates a $60 billion to $90 billion serviceable market opportunity in its fiscal year 2026 (ending October 2026) alone. These customers are planning to build AI chip clusters consisting of around one million AI chips.

    While Broadcom is unlikely to capture all of this business, it represents a substantial opportunity. The company’s newer customers should also contribute to revenue growth in the coming years. AMD saw a 69% increase in its data center revenue last quarter, reaching $3.9 billion. Meanwhile, Broadcom’s AI-related revenue grew by 77% to $4.1 billion. These figures suggest a similar level of growth, although Broadcom may have a larger AI opportunity going forward.

    Valuations and Verdict

    AMD’s stock is currently the less expensive option. It has a forward price-to-earnings (P/E) ratio of approximately 22 based on this year’s analyst estimates, compared to Broadcom’s 28.6. AVGO PE Ratio (Forward) Chart Both companies experienced similar revenue growth rates in the last quarter, with AMD’s revenue increasing by 24% year over year and Broadcom’s revenue jumping by 25%. However, I believe Broadcom holds a more significant opportunity with custom AI chips. I consider both stocks to be solid choices following the recent market downturn. AMD is a leading player in the data center CPU market, and it should continue to see solid GPU growth, especially with the increasing importance of inference. That said, I favor Broadcom between the two, given the exciting opportunities it has with custom AI chips.

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