Will AMD or Broadcom be the next AI chip stock after Nvidia?

Nvidia continues to dominate the market for chips used in artificial intelligence (AI) data centers. But AI is a huge opportunity, so second place isn’t too bad in this case. Statista predicts that the AI ​​chip market will continue to grow and reach $333 billion by the end of 2020.

This leaves plenty of room for other companies to make big returns for investors in the coming years. broadcom (NASDAQ:AVGO) and advanced micro device (NASDAQ: AMD) There are probably two most likely candidates. Both are making inroads with AI chips, but at the end of the day, one stands out over the other. Here’s why Broadcom is likely a good AI chip stock to own.

Forgot Nvidia in 2009? This unusual signal is flashing again. In 2009, a “double down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, a company 100 times smaller than Nvidia is flashing the same “full conviction” signal. Continued “

AMD is picking a tougher battle

The million-dollar question is: How can small businesses compete with industry giants? Advanced Micro Devices, or AMD for short, competes head-on with Nvidia, primarily in general-purpose AI chips. To its credit, AMD is gaining some traction. Data center revenue grew 57% year over year to $5.8 billion in the first quarter of 2026.

AMD will naturally get some opportunities from AI hyperscalers who don’t want to put all their eggs in Nvidia’s basket. AMD recently announced its supply plans meta platform Powered by 6 gigawatts of Instinct GPUs, including the first gigawatt custom version. But Meta and other Nvidia customers already rely heavily on Nvidia’s CUDA software, so AMD is unlikely to threaten Nvidia’s dominance.

Broadcom’s Custom Silicon Roadmap Makes You a Winner

To crack Nvidia’s moat, it will need to take a new path. Broadcom has done just that with its XPU chips. Rather than focusing on general-purpose AI chips, Broadcom co-designs custom chips for each customer’s AI workloads. This increases efficiency and also allows you to build closer relationships with your customers. Broadcom is working with Anthropic. alphabetMeta Platform, OpenAI, and more on custom silicon. This is a huge opportunity as computing moves from training to inference and efficiency becomes more important.

Wall Street sold off Broadcom hard due to its second-quarter gains, mainly because its third-quarter AI revenue outlook fell short of expectations. However, CEO Hock Tan reiterated the company’s long-term forecast of annual AI chip sales of $100 billion from fiscal 2027. Broadcom generated $10.8 billion in AI revenue in the second quarter and is expected to continue to see significant growth as these custom silicon projects roll out.

Broadcom is worth the premium

Given Broadcom’s high-profile AI customer list and continued momentum toward $100 billion in annual AI chip revenue, it’s hard not to like Broadcom’s competitive position over AMD at this point. Investors may find Broadcom stock to be more expensive than AMD stock, but that premium appears to be justified.

Analysts believe that Broadcom’s future growth will be much faster compared to AMD, and the valuation difference between the two is not that large. Broadcom is where you want to put your money, especially after this dip in revenue.

Should you buy Broadcom stock now?

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Justin Pope holds positions at Alphabet and Meta Platforms. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Broadcom, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.

Will AMD or Broadcom be the next AI chip stock after Nvidia? Originally published by The Motley Fool