Nvidia gets the headlines. Broadcom quietly gets the contracts - and those contracts just lifted revenue again.
The company posted another quarter of growth driven by AI chip demand. Behind the number is a business model most investors still don't fully understand.
Broadcom doesn't sell one AI chip to everyone. It designs custom chips - called XPUs, built around one customer's exact workload - for the biggest cloud companies in the world.
Think Google. Meta. ByteDance, the company behind TikTok. Each one gets its own silicon, designed by Broadcom around the AI software it actually runs.
That's a different bet than Nvidia's. Nvidia sells the same chip to every buyer. Broadcom builds a different chip for each whale.
Both businesses are working. They're just working in different lanes - and Broadcom's lane has way less competition in it.
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Broadcom isn't just a chip company anymore. The 2023 VMware deal turned it into a software giant overnight - VMware sells the tools companies use to run their data centers.
That added a recurring revenue stream that doesn't move with chip cycles. When chip orders cool off, the software bills still come in every month.
So when investors ask why Broadcom's stock has run as hard as it has, this is half the answer. AI chips on one side. Steady software on the other.
Cloud giant spending. Google, Meta, Microsoft, and Amazon have all said they plan to spend more on AI build-out next year, not less.
That spending is what fills Broadcom's order book. If it holds up, the custom AI chip business keeps growing right alongside it.
The headline AI trade has been Nvidia for two years running. The second trade is starting to look just as interesting.
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