Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
Broadcom has significantly outpaced Nvidia in stock performance over the past year, with its shares surging 96% compared to Nvidia’s 33% gain. This strong performance, as of October 25, 2025, is largely attributed to the semiconductor and networking specialist’s expanding influence in the artificial intelligence (AI) sector, particularly through its customizable AI chips and a recent deal with OpenAI.
Broadcom’s AI Expansion
The current wave of AI adoption, which began in early 2023 following the introduction of ChatGPT, initially saw Nvidia’s graphics processing units (GPUs) become the industry standard. However, Broadcom is increasingly positioned as a key player, leveraging its application-specific integrated circuits (ASICs) to meet the growing demand for energy-efficient AI workloads in data centers.
While GPUs offer flexibility, ASICs are customized for specific tasks, providing a more power-efficient alternative. Broadcom’s existing role in data centers is substantial, with management noting that nearly all internet traffic utilizes some form of its technology, particularly its Ethernet switching and networking products.
Financial Performance and Key Partnerships
Broadcom reported record revenue of $15.9 billion in its fiscal third quarter, which ended August 3, marking a 22% increase year-over-year. Adjusted earnings per share rose 36% to $1.69. AI-specific revenue was a significant driver, surging 63% to $5.2 billion during the quarter.
The company continues to strengthen its relationships with major hyperscale customers, including Alphabet, Meta Platforms, and TikTok parent ByteDance. Broadcom CEO Hock Tam indicated that the company is gaining market share with these original customers and anticipates continued acceleration in AI-related growth, potentially exceeding its prior forecast of 50% to 60% for the year.
OpenAI Deal and Analyst Outlook
Earlier this month, Broadcom announced a significant agreement to help design and deploy 10 gigawatts of its customizable chips for OpenAI, the creator of ChatGPT. Melius Research analyst Ben Reitzes estimates that each gigawatt could translate to an additional $20 billion in revenue for Broadcom, suggesting this deal is incremental to the company’s existing guidance.
Reitzes views this partnership as a validation of Broadcom’s chips as a viable alternative to Nvidia’s GPUs, potentially attracting more large-scale users. He has previously advocated for Broadcom to be considered a “Magnificent Eight” stock, alongside the existing “Magnificent Seven,” projecting the company could eventually control 30% of the AI compute market.
Market Context and Valuation
The broader AI market is projected for exponential growth, with PwC estimating its potential value at $15.7 trillion annually by 2030. This underscores the substantial opportunity for companies at the forefront of AI development.
From a valuation perspective, Broadcom stock trades at 38 times next year’s earnings, while Nvidia is at 29 times. Both companies currently command a premium in the market, reflecting their pivotal roles in the AI revolution.
Outlook
Broadcom’s expanding customer base, including the new OpenAI partnership, and its strategic focus on energy-efficient ASICs position it as a significant contender in the evolving AI landscape. The company’s strong financial performance and growing market share indicate its potential to continue its upward trajectory as AI adoption intensifies.
