There’s no doubt that it’s Nvidia (NASDAQ:NVDA) is a dominant player in the market for artificial intelligence (AI) chips, with its graphics processing units (GPUs) playing a central role in training popular AI models such as ChatGPT and Llama.
The company has a large technological lead in the AI GPU field, so its reach is wide, and it lags far behind its rivals when it comes to AI GPU sales. As a result, Nvidia’s data center revenue grew an astonishing 112% year-over-year in Q3 2025 to a record $30.8 billion. Meanwhile, AMD’s revenue from this division was just $3.5 billion in its most recently reported quarter.
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At the same time, some investors seem a bit concerned about Nvidia’s relative slowdown in growth. The company’s total revenue grew an impressive 94% year-over-year to $35.1 billion last quarter, slower than the 122% year-over-year increase that NVIDIA reported in the second quarter of fiscal 2025. did.
Market outlook for the current quarter indicates a 70% year-over-year increase in sales. Additionally, NVIDIA trades at a premium valuation. This may lead investors to look for other ways to take advantage of the growth in the AI chip market. That’s why now is a good time to take a closer look at the company being touted as the next best bet to Nvidia in the burgeoning AI chip market.
The stock has already delivered impressive gains this year and looks poised for further gains after the company releases its fiscal 2024 fourth-quarter results on Thursday.
broadcom (NASDAQ:AVGO) has been named the second most important AI chip company. It’s a major player in application-specific integrated circuits (ASICs), a type of custom chip that’s gaining traction in the AI space because of its lower cost and power efficiency compared to GPUs sold by Nvidia.
Specifically, Broadcom controls an estimated 55% to 60% of the ASIC market.
Analysts at market research firm Lucitel predict that demand for AI-specific ASICs will grow at an annual rate of 32% through the end of the decade. This bodes well for Broadcom. Additionally, JPMorgan analyst Harlan Sarr believes Broadcom’s cumulative revenue opportunity in the custom AI chip market could reach a staggering $150 billion.
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This helps explain why Broadcom management is raising its AI-specific revenue outlook. The company expects AI chip sales to be $12 billion at the end of the current fiscal year, up from its previous forecast of $11 billion. For comparison, generative AI accounted for 15% of Broadcom’s $28 billion in semiconductor sales in fiscal 2023, or just $4.2 billion.
So Broadcom’s AI revenue is on track to nearly triple in just one year, and given the huge opportunity in the custom AI chip market, we’re still at the beginning of an incredible growth curve in this space. Further positive news on this front could send Broadcom shares even higher when it releases its quarterly report on Thursday.
The consensus estimate from analysts supporting the company is for fiscal fourth-quarter sales of $14.06 billion, an increase of 51% from a year ago. Importantly, this includes revenue contribution from the November 2023 acquisition of VMware. This revenue forecast is in line with Broadcom’s forecast of $14 billion. However, the company raised its full-year earnings forecast, so there’s a good chance sales will end up beating Wall Street’s expectations.
Analysts expect adjusted earnings to jump to $1.39 per share from $1.11 a year ago, which would be a solid 25% increase. However, given AI’s increasing earnings outlook, ideally its earnings should be better than Wall Street’s expectations.
At the same time, Broadcom’s dominant position in the fast-growing custom AI chip market gives management firm guidance for 2025, especially given Broadcom’s push to push the technological boundaries in this space. You should be able to. Management recently noted that Broadcom leveraged foundry partner TSMC’s advanced chip packaging technology to develop new technology to make custom AI chips faster and pack more memory.
Broadcom currently trades at about 29 times forward earnings, roughly in line with the average multiple for the tech-heavy Nasdaq 100 index. This is an attractive valuation for this semiconductor stock. Investors should consider seizing this opportunity soon, as the stock price is likely to skyrocket after the release of the quarterly report.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Harsh Chauhan has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, JPMorgan Chase, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
“Prediction: This artificial intelligence (AI) chip’s stock price will soar after Dec. 12” was originally published by The Motley Fool.
