Broadcom (AVGO) stock was surged more than 9% to close at a record high Friday after its latest quarterly earnings results indicated that its AI chips pose more competition for industry star Nvidia (NVDA).
Broadcom's gain added roughly $135 billion to the chipmaker’s market capitalization to hit nearly $1.6 trillion. The stock was set to notch a fresh record above $335.
Nvidia, meanwhile, sank 2.7% and its rival Advanced Micro Devices (AMD) dropped 6.6%.
The moves came after Broadcom’s third quarter earnings results and outlook for fourth quarter AI chip sales surpassed Wall Street’s expectations. The company expects revenue from AI chips to hit $6.2 billion in the fourth quarter, ahead of the $5.8 billion expected by analysts tracked by Bloomberg. Broadcom also added a new customer, reportedly OpenAI, whose purchases of its AI semiconductors are set to add $10 billion to the chipmaker’s revenue in 2026.
Broadcom is also working on rolling out an AI chip using a next-generation manufacturing technology for one of its customers, called a “2 nanometer” node process, which JPMorgan analyst Harlan Sur noted Friday is “an industry first and well ahead of NVDA” and other chipmakers. William Blair analyst Sebastien Naji said Broadcom’s latest chip designs are “cementing” the company as “the leading alternative” to Nvidia.
Broadcom makes custom chips for its customers called ASIC accelerators, while Nvidia makes general-purpose AI chips called GPUs, or graphics processing units.
Whether custom chips such as Broadcom’s pose a substantive threat to Nvidia’s GPUs in the AI chip market has been a major debate on Wall Street. Morgan Stanley analysts in a lengthy 2024 analysis said they had previously been optimistic about ASICs gaining share from Nvidia’s AI GPUs, but Nvidia continued to dominate.
But Broadcom’s latest results showed its custom chips gaining a stronger foothold in the AI market. Bank of America analyst Vivek Arya said the company’s share of the AI compute and networking market could more than double from 11% currently to 24% by 2027.
However, Arya said this doesn’t necessarily mean Broadcom will threaten Nvidia’s dominance.
“While we agree AVGO is taking more share, we believe the AI pie could just be getting bigger…” he wrote in a note to clients Friday.
Broadcom's latest earnings beat comes after Nvidia's results disappointed Wall Street, with its data center revenue, which includes sales of its AI chips, falling short of analysts' estimates. Nvidia shares are down more than 6% over the past month, but the chipmaker remains the most valuable company in the world, with a market capitalization of over $4 trillion.
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