3 Reasons Broadcom Could Be a Better AI Play Than Nvidia | The Motley Fool

Nvidia (NVDA 3.68%) is often considered the simplest way to invest in the expanding artificial intelligence (AI) market. It controls over 90% of the market for data center GPUs, which the world’s leading AI companies use to train their AI algorithms. It also locks in those customers with its proprietary software and services, so AI applications optimized for Nvidia’s chips usually need to be rewritten to work on competing GPUs.

From fiscal 2026 (which ended this January) to fiscal 2029, analysts expect Nvidia’s revenue and EPS to grow at CAGRs of 37% and 38%, respectively, as the AI market expands. Those are incredible growth rates for a stock that trades at just 22 times this year’s earnings. However, another emerging AI superpower — the chip and infrastructure software maker Broadcom (AVGO 2.45%) — could actually outperform Nvidia this year for three simple reasons.

1. It’s better diversified than Nvidia

Nvidia generated 91% of its revenue from its data center chips in its latest quarter. Broadcom’s business was more diversified: 61% of its revenue in its most recent quarter came from semiconductor solutions, while the remaining 39% came from infrastructure software. Therefore, any concerns about slower AI and data center spending could hurt Nvidia much more than Broadcom, which still sells non-AI chips across a wide range of industries.

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