Nvidia Artificial intelligence (AI) still dominates the market for chips used in data centers. But AI is a huge opportunity, and second place isn’t so bad in this regard. Statista estimates that the AI chip market will continue to grow and reach $333 billion by the end of the decade.
That leaves plenty of room for other companies to make money for investors in the coming years. Broadcom (AVGO 7.49%) And Advanced Micro Devices (Amt 10.86%) Two will be prime candidates. Both have hit the ground running with their AI chips. Here’s why Broadcom owns the best AI chip stocks.
Image Source: Getty Images.
AMD takes the tough fight
The million dollar question is how does a small company compete with an industrial company? Advanced Micro Devices, or AMD for short, competes head-to-head with Nvidia primarily in general-purpose AI chips. To its credit, AMD has gained some traction; Data center revenue grew 57% year over year to $5.8 billion in the first quarter of 2026.
Today’s change
(-10.86%) $-56.82
Current price
$466.38
Key data points
Market Cap
$760B
Day limit
$463.95 – $505.62
52 week limit
$115.06 – $546.44
Vol
46.9M
Average Vol
37.5M
gross margin
47.09%
AMD is naturally going to see some opportunities from AI hyperscalers, who won’t want to put all their eggs in Nvidia’s basket. AMD recently announced plans to offer Meta platforms 6 gigawatts of its Instinct GPUs, including a custom version for the first gigawatt. But since Meta and other Nvidia customers already rely heavily on Nvidia’s CUDA software, it’s unlikely that AMD will ever threaten to strangle Nvidia.
Broadcom’s custom silicon roadmap makes it a winner
To make a dent in Nvidia’s moat, you’ll have to take a new path. Broadcom has done that with its XPU chips. Instead of emphasizing general-purpose AI chips, Broadcom is co-designing custom chips for each customer’s AI workload. This creates efficiency gains and can create a sticky relationship with that customer. Broadcom is working with Anthropic. lettersIn custom silicon, such as meta-platforms and OpenAI. This is a big opportunity as computation shifts from training to inference, where efficiency is critical.
Today’s change
(-7.49%) $-31.39
Current price
$387.52
Key data points
Market Cap
$1.8T
Day limit
$386.37 – $410.32
52 week limit
$241.11 – $495.00
Vol
1.9M
Average Vol
25.3M
gross margin
65.66%
Dividend yield
0.64%
Wall Street strongly sold Broadcom on its second-quarter earnings, mainly because its third-quarter AI revenue guidance came in below expectations. However, CEO Hock Tan reiterated the company’s long-term expectation of $100 billion in annual AI chip sales starting in fiscal 2027. Broadcom generated $10.8 billion in AI revenue in the second quarter, so there is still significant growth as these custom silicon projects roll out.
Broadcom is worth the premium
With Broadcom’s list of top AI customers and continued momentum toward $100 billion in annual AI chip revenue, it’s hard not to prefer Broadcom’s competitive position over AMD’s at this point. Investors may note that Broadcom stock is more expensive than AMD, but the premium is reasonable.
AVGO PS Ratio (Forward) data by YCharts
Analysts see Broadcom growing much faster compared to AMD, and the valuation gap between the two isn’t that big. Broadcom is where you want to put your money, especially after this latest earnings slump.
Justin Pope has positions on the Alphabet and Meta platforms. The Motley Fool has and recommends positions in Advanced Micro Devices, Alphabet, Broadcom, MetaPlatforms, and Nvidia. The Motley Fool has a disclosure policy.
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