Nvidia (NASDAQ:NVDA) has proven to be one of the early winners in the artificial intelligence (AI) revolution, driving triple-digit revenue in recent quarters and pledging to continue innovating to accelerate growth. The stock’s performance followed suit, with the stock soaring nearly 190% this year, making it the best performer on the Dow Jones Industrial Average. NVIDIA was recently invited to participate in this premier benchmark.
But even after all these gains in revenue and stock prices, one wonders whether Nvidia is still the best AI player in the space, or whether we should forget about Nvidia and look to a different growth story. You might think so. Recently, companies that have been attracting attention are companies that, like Nvidia, completed a stock split this year due to a sharp rise in their stock prices. Still, this particular company is trading at a reasonable valuation and could have plenty of growth potential going forward. Should you choose this stock over stock market star Nvidia? Let’s find out.
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So which up-and-coming AI player am I talking about? A company known for networking. In fact, we sell thousands of products used in a variety of locations, from data centers to smartphones. More than 99% of all internet traffic passes through this player’s technology. I’m talking about Broadcom. (NASDAQ:AVGO). The company has a track record of revenue growth, and two new growth drivers have recently emerged: AI and Broadcom’s acquisition of cloud company VMware.
Both of these businesses helped Broadcom increase its revenue by 47% to more than $13 billion in its most recent quarter. According to Broadcom, demand is rapidly increasing as cloud service providers expand their business, and Broadcom’s AI networking and custom AI accelerators are inundated with demand. The company said custom AI accelerator revenue tripled, Ethernet switching quadrupled and PCI Express switch revenue doubled in the quarter.
Thanks to this strength, Broadcom now expects full-year AI revenue of $12 billion, up from its previous estimate of about $11 billion.
It’s important to note that we may be in the early stages of this AI demand, as data centers upgrade their current systems in preparation for accelerated computing. Nvidia CEO Jensen Huang said there is currently about $1 trillion worth of old computing systems in existence that will need to be updated over the next few years. This could clearly benefit Broadcom.
As for VMware, Broadcom recently promoted VMware Cloud Foundation at a conference in Las Vegas. This product is a complete software stack that virtualizes data centers and creates private clouds for customers. Reservations for this product brought the VMware platform to $2.5 billion in annual reservations in the quarter, an increase of more than 30% from the previous quarter.
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