Broadcom has seen significant growth in its AI revenue, which rose 65% year-over-year to $20 billion. This surge contributed to the company achieving record semiconductor revenue of $37 billion for the year.
Analysts are taking note of this growth, as it signals Broadcom's increasing influence in the custom chip market.
Nvidia's CEO Jensen Huang recently stated that the company remains a generation ahead of the competition. He insisted that Nvidia will keep more than 50% of the market share for at least the next five years.
According to analyst Gil Luria from D.A. Davidson, Nvidia is expected to maintain over 70% market share for the next three years. Luria has given Nvidia a buy rating with a price target of $250 per share, which suggests nearly a 31% upside from its recent price.
Broadcom's custom chip deal with OpenAI, announced in October, highlights a growing trend among major tech companies seeking alternatives to Nvidia. Despite this, Nvidia continues to be a significant player in the market.
Broadcom's efforts are seen as a response to the need for diversification, especially as companies like Google, Amazon, and Microsoft also look to develop their custom chips while still relying on Nvidia for many of their operations.
Analysts from Morgan Stanley recently reaffirmed their buy-equivalent ratings on both Broadcom and Nvidia, showing a preference for Nvidia despite the rising interest in application-specific integrated circuits (ASICs).
Wolfe analysts, however, upgraded Broadcom to a buy-equivalent rating, estimating around 7 million TPU shipments by 2028. This is expected to position Broadcom as a significant competitor to Nvidia in the future.
Market expert Jim Cramer noted that Broadcom's stock has dropped nearly 20% from its record close of nearly $413 and is down 4% year-to-date.
He suggested that this decline may present a buying opportunity for investors. Cramer emphasized that despite the challenges facing the stock, it still has strong fundamentals, and he encourages a buy-and-hold strategy for those looking to invest in Broadcom.