Title: Soaring High: Expect this AI Chip Stock to Reach New Heights Post-December 12
Nvidia, represented by its ticker symbol NVDA, is undeniably the heavyweight in the artificial intelligence (AI) chip market. This dominance is largely due to the integral role of its graphics processing units (GPUs) in training AI models such as ChatGPT and Llama. The tech giant's considerable technological lead in the AI GPU sector has created a formidable moat, making it difficult for competitors to catch up.
In the third quarter of fiscal 2025, Nvidia's data center revenue skyrocketed by an impressive 112% year-over-year, reaching an astounding $30.8 billion. Meanwhile, AMD - its nearest competitor - managed just $3.5 billion in AI GPU revenue during its latest reported quarter.
Despite Nvidia's impressive growth, some investors have expressed concerns about its relative deceleration. Although the company's total revenue increased by 94% year-over-year in the previous quarter, it fell slightly short of the 122% growth reported in the second quarter of fiscal 2025.
The growing interest in AI chips has sparked speculation about alternative investments. One such contender is Broadcom, a company often lauded as the second most influential player in the AI chip sector. Known for its dominance in application-specific integrated circuits (ASICs), Broadcom controls an estimated 55-60% of the market for these custom chips.
ASICs are gaining prominence in the AI space for their lower cost and power efficiency compared to GPUs like Nvidia's. According to a Lucitel analyst forecast, the demand for AI-specific ASICs is projected to grow at an annualized rate of 32% through the end of the decade. This increased demand is a strong indicator of Broadcom's potential growth, given JPMorgan analyst Harlan Sur's estimation of a $150 billion cumulative revenue opportunity in the custom AI chip market.
Broadcom's AI-specific revenue is on an impressive movement, expected to reach $12 billion by the end of this fiscal year, a significant leap from its earlier outlook of $11 billion. For context, generative AI accounted for 15% of Broadcom's fiscal 2023 semiconductor revenue, translating to $4.2 billion. This indicates that Broadcom's AI revenue is poised to nearly triple in just a year.
Investors anticipate Broadcom to deliver positive results for its fiscal 2024 fourth quarter, which is set to be released on Thursday. Analysts predict revenue of $14.06 billion, a 51% increase from the prior year, and earnings per share (EPS) to jump to $1.39, representing a 25% increase from the previous year. Given Broadcom's impressive performance and AI-focused growth, investors are optimistic about a potential beat in both revenue and earnings.
Broadcom trades at an attractive 29x forward earnings ratio, in line with the average multiple of the Nasdaq-100 index. Investors may find this an opportune moment to capitalize on the booming AI chip market, with the stock projected to soar even further after the release of the fourth-quarter results.
While some investors are looking beyond Nvidia and exploring alternative investment opportunities in the AI chip market, Broadcom, with its dominance in AI-specific ASICs, has emerged as a contender. Given the projected annualized growth of 32% for AI-specific ASICs through the end of the decade, many investors are considering Broadcom as a promising option for investing in finance, with analysts establishing a potential $150 billion cumulative revenue opportunity in the custom AI chip market.
