This article compares Broadcom (AVGO) and NVIDIA (NVDA), two different ways to play the AI boom: NVIDIA leads in processors that train models, while Broadcom focuses on custom chips and networking infrastructure software. Broadcom reported revenue of $63.9 billion (up 23.9%) and net income of $23.1 billion, but nearly 48% of revenue comes through distributors and its top five customers account for about 40%. NVIDIA posted revenue of $215.9 billion (up 65.5%), net income of about $120.1 billion and free cash flow of $96.7 billion, though two direct customers account for 22% and 14% of revenue. Risks include cyclical demand in the semiconductor industry, competition from custom chips built by tech giants such as Microsoft and Amazon, and U.S. export controls on AI chips to China. The author sees NVIDIA as the more attractive valuation and chooses it, citing its lower P/E and P/S ratios and its purchase of Hugging Face.
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