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Nvidia (NASDAQ: NVDA) and Broadcom (NASDAQ: AVGO) are two of the largest and best-positioned semiconductor companies for the artificial intelligence age. The AI infrastructure market is expanding rapidly, with Gartner recently projecting it will hit nearly $2 trillion in 2027.
While Broadcom versus Nvidia is essentially a battle between off-the-shelf graphics processing units (GPUs) and custom AI application-specific integrated circuits (ASICs), the AI infrastructure market is more than big enough for both companies to be winners. However, let's dig in to see which chip stock looks like the better buy today.
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Nvidia has been the biggest AI infrastructure winner thus far, becoming the world's largest company in the process. However, the stock still looks attractive, with big growth opportunities still in front of it, and it is trading at a forward P/E of only 14.5 times fiscal 2028 (ending January 2028) analyst estimates.
The company remains the king of AI, with its GPUs still the primary chips powering AI workloads. It is particularly strong in the AI model training market, as its CUDA software platform, on which most foundational AI code was written, continues to provide it with a wide moat. Nvidia also dominates the neocloud and enterprise markets, while Space Exploration Technologies has also decided to use its chips exclusively.
That said, what makes the future most exciting for Nvidia is that the company has really transformed itself from just a GPU maker into a complete AI infrastructure company. Its networking portfolio lets it provide complete end-to-end server solutions, while its Arm Holdings-based central processing units (CPUs) and newer language processing units (LPUs) (which come from its Groq "acquisition") allow it to configure them for specific AI tasks, like inference or agentic AI. It has also made important acquisitions in the software space (SchedMD and Hugging Face) that help it orchestrate and distribute AI.
Not to be overlooked, Nvidia has also locked up a huge amount of the scarce high bandwidth memory (HBM) supply that AI chips need to be packaged with so that they aren't sitting idle. This all but assures that it will remain the AI chip leader.
As hyperscalers (owners of large data centers) continue to increase their AI infrastructure spending, they are looking for Nvidia alternatives to diversify their supply chains and reduce costs. One of the most common ways they are doing this is through designing their own custom AI chips, especially for inference, where Nvidia's CUDA moat is not as deep.
This is benefiting Broadcom, which is a leader in ASICs, which are purpose-built, hardwired chips. It provides important IP (intellectual property) and services to help turn its customers' chip designs into reality. It helped Alphabet develop its Tensor Processing Units (TPUs), which are considered the gold standard of AI ASICs. This is a huge driver, with both Anthropic and Alphabet now large and growing TPU customers.
This has also led to other hyperscalers developing their own custom chips, including OpenAI and Meta Platforms. Overall, Broadcom sees its ASIC revenue doubling next fiscal year to $115 billion, then doubling again in fiscal 2028 (ending October 2028) to $230 billion. Its custom chip business also feeds into its networking business, where it provides key components that let servers transfer data quickly and efficiently distribute AI workloads.
Given its custom AI chip opportunity, Broadcom has a clear path to outsize growth over the next few years and has also importantly locked up HBM supplies. The stock currently trades at a forward P/E of under 19 times fiscal 2027 estimates, but that drops to below 12 times based on the fiscal 2028 consensus.
Picking between Nvidia and Broadcom is a bit of a coin flip, as both are great stocks with strong growth ahead, trading at cheap future valuations. However, if I had to pick just one, it would be Broadcom, as ASICs should take share with the rise of inference, and it's the smaller of the two companies, which could mean more upside potential.
Fortunately, investors don't need to pick one and can own both of these top AI stocks in their portfolios.
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Geoffrey Seiler has positions in Alphabet, Broadcom, and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Arm Holdings, Broadcom, Meta Platforms, and Nvidia. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.
Broadcom vs. Nvidia: The AI Revolution Is Big Enough for Both. Here's the Better Buy. was originally published by The Motley Fool
