Since the release of OpenAI's ChatGPT in late 2022, artificial intelligence (AI)-related stocks have exploded in popularity. Their continued price rise has led to NVIDIA A stock split is carried out to increase the liquidity of the stock and make the shares available to public investors.
But Nvidia isn't the only way to bet on this exciting new opportunity. Let's find out why. Broadcom (NASDAQ: AVGO) This is one of the rising AI stock splits you should have on your investment radar.
Will Broadcom become the next Nvidia?
Established through a merger in 2015 Broadcom Corporation and Avago TechnologiesBroadcom is a diversified semiconductor company that designs and manufactures a variety of information technology hardware.
Unlike Nvidia, Broadcom is not a big player in the high-end general-purpose market. Graphics Processing Unit Rather than GPUs used to train and run generative AI algorithms, the company gains industry exposure through custom chips tailored to each client's specific use case.
For data centers, opting for a custom Broadcom-designed chip may mean higher upfront costs and commitments than buying an off-the-shelf solution such as Nvidia's H100, but the trade-off is cost and power benefits that could pay off in the long run.
Broadcom boasts major clients including: alphabet (The company has a contract with Broadcom to design its Google TPU chips.) and Chinese social media giant Bytedance are reportedly looking to use Broadcom's services to secure supplies of powerful processors amid rising tensions with the U.S. government. Opting for Broadcom's custom chips could allow the Chinese company to comply with strict export controls that effectively block many of Nvidia's most advanced GPUs.
Non-AI-related growth drivers
It's never a good idea Putting all your eggs in one basket – especially if that basket is an over-hyped technology megatrend. AI technology could transform the global economy, but it's unclear when that will happen or whether the current demand for AI chips is sustainable. Past hype cycles, like the Internet, have ended badly for companies that got too overexposed, too soon.
The good news is that Broadcom is diversifying. The company provides semiconductor services to a variety of industries, from smartphones to enterprise networking. These are mostly mature businesses, but they're helping to stabilize Broadcom's business.
But the company also has VMware, which is driving non-AI-related growth. Scheduled for completion in 2023The $69 billion deal, one of the largest in technology history, gave Broadcom greater exposure to the infrastructure software business and helped the company's overall revenue grow 43% year-over-year to $12.49 billion in the second quarter.
Is Broadcom stock a buy?
Though its stock price has risen nearly 470% over the past five years, many smaller investors are finally starting to take notice of Broadcom after management announced a 10-for-1 stock swap. Stock split Once it goes live on July 15, a four-digit stock price could become a reality again. Keep in mind that this move will not change the company's market cap (the value of its total shares outstanding) or valuation relative to earnings.
The good news is, Forecasted price-earnings ratio Broadcom's price-to-earnings ratio is just 28 times. Nasdaq The average is 31, compared to Nvidia and Advanced Micro Deviceswhich boast forward P/E ratios of 36 and 54, respectively, meaning the companies are a safer way to bet on the long-term AI opportunity.
Should I invest $1,000 in Broadcom right now?
Before you buy Broadcom stock, consider the following:
of Motley Fool Stock Advisor The analyst team Top 10 Stocks Here are the stocks investors should buy right now…Broadcom wasn't one of them. The 10 stocks selected could generate huge profits over the next few years.
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Suzanne Frey, an executive at Alphabet, serves on The Motley Fool's board of directors. Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Advanced Micro Devices, Alphabet, and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
Forget Nvidia: This Stock-Splitting AI Stock Might Be a Better Buy was originally published by The Motley Fool.
