Not AMD. Not Marvell. Here's Which Company Nvidia Needs to Be Worried About.
Broadcom is expected to grow at a faster pace than Nvidia over the next few years.
Nvidia leads the AI computing unit market with its GPUs, but it faces competition from two primary custom AI chip firms: Marvell and Broadcom. While AMD also produces GPUs, its data center division is smaller and grew more slowly than Nvidia's. GPUs, although versatile, lack optimization for specific workloads, making custom AI chips a significant threat to Nvidia's business.
Marvell, with clients like Microsoft and Amazon, and Broadcom, partnering with Alphabet, Meta Platforms, Anthropic, and OpenAI, are the two key players in this industry. Marvell's AI data center revenue in Q2 was $2.1 billion, while Broadcom's AI semiconductor revenue reached $16.7 billion. Broadcom's crown jewel is Google's Tensor Processing Unit (TPU), a result of its collaboration with Alphabet.
These units have evolved through several generations and are now even being sold by Alphabet due to high demand. Broadcom's AI segment revenue is projected to grow from $58 billion this year to $115 billion by 2027 and $230 billion by 2028.
While Nvidia is expected to grow its revenue by 70% by 2027, Broadcom's growth is anticipated to be slower. Nonetheless, Broadcom's stock isn't fully reflecting its expected growth. Currently trading at 43 times trailing earnings, it appears undervalued compared to its projected growth. If the stock rises to 35 times earnings by the end of the next fiscal year, it could potentially double, indicating significant opportunities for investors.
With new clients in the AI sector, Broadcom is well-positioned to establish itself alongside Nvidia as a major leader in the AI computing space.
Written by urgent.news from Motley Fool's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
