Nvidia’s dominance in AI accelerators is under threat from rival Broadcom. The chipmaker has emerged as the industry standard for graphics processing units (GPUs), but Broadcom is expected to capture significant market share in custom AI chips.
Broadcom sells a range of semiconductor products, including combined Wi-Fi and Bluetooth chips in smartphones and networking chips in Arista switches. However, its leadership in application-specific integrated circuits (ASICs) has Wall Street’s attention. Analysts estimate Broadcom has 60% market share in custom AI chips due to its relationships with three hyperscalers: Alphabet, Meta Platforms, and ByteDance.
Broadcom’s revenue from these customers is expected to increase by at least 70% annually for the next three years, and may even reach 95%. This growth would erode Nvidia’s market share. The company’s CEO, Hock Tan, revealed that Broadcom has selected two new hyperscalers as potential customers, which could lead to faster revenue growth.
However, there are reasons for Nvidia shareholders to remain optimistic. Broadcom will not develop ASICs for small companies, and the complexity of designing these chips makes them less flexible than GPUs. Additionally, only a few companies have deployed custom AI silicon at scale, making Nvidia well-positioned to maintain its leadership in AI accelerators. As a result, analysts expect Nvidia’s adjusted earnings to increase by 34% annually through fiscal 2027, making the current valuation look reasonable.
Source: https://www.fool.com/investing/2024/12/25/nvidia-stock-investors-bad-news-ai-rival-broadcom