Broadcom vs. AMD: Which Is the Most Compelling AI Chip Stock After NVIDIA?

Author: Justin Pope

Translated and edited by: TechFlow Research

Introduction: Beyond NVIDIA, the race for the #2 position in the AI chip market is heating up. AMD has chosen to compete head-on with NVIDIA’s general-purpose GPU approach, while Broadcom has pursued a differentiated path—custom chips (XPUs)—winning top-tier customers including Anthropic, Google, Meta, and OpenAI.

Following its latest earnings report, Broadcom’s stock plunged—but its CEO remains steadfast in targeting $100 billion in annual AI chip revenue by fiscal year 2027. Motley Fool analyst Justin Pope argues that even though Broadcom trades at a higher valuation, that premium is justified.

Caption: Source Getty Images

NVIDIA still firmly holds the top spot in the AI data center chip market. Yet the AI opportunity is so vast that the #2 position is also highly valuable. According to Statista, the AI chip market is projected to grow to $33.3 billion by 2030.

This means other companies also offer investors significant profit potential. Broadcom (AVGO, down 7.49% on the day) and AMD (down 11.01% on the day) are the two strongest contenders. Both have made progress in the AI chip space—but overall, one clearly stands out as the better long-term holding.

AMD Chose the Harder Path

The core question is: How can a smaller company compete with an industry giant for market share?

AMD’s strategy is to go toe-to-toe with NVIDIA in the general-purpose AI chip arena. To be fair, it has achieved some tangible results: Its Q1 2026 data center revenue surged 57% year-over-year to $5.8 billion.

AI hyperscalers naturally want to avoid over-reliance on NVIDIA—and AMD benefits from this diversification push. AMD recently announced it will supply Meta with 6 gigawatts (GW) of Instinct GPUs, with the first GW being a custom version.

Yet AMD is unlikely to meaningfully threaten NVIDIA’s dominance. Meta and other NVIDIA customers are deeply entrenched in NVIDIA’s CUDA software ecosystem—a moat no amount of hardware specs alone can overcome.

Broadcom’s Custom-Chip Strategy Is the Winning Approach

To breach NVIDIA’s formidable moat, you need a different route—and Broadcom has done just that with its XPU chips.

Unlike AMD’s focus on general-purpose AI chips, Broadcom designs chips tailored specifically to each customer’s AI workloads. This delivers efficiency advantages—and deepens customer stickiness. Currently, Broadcom is designing custom chips for Anthropic, Alphabet (Google’s parent company), Meta, and OpenAI.

As compute demand shifts from training to inference, efficiency becomes increasingly critical—further amplifying the advantage of custom chips.

Following its latest quarterly earnings report, Wall Street dumped Broadcom shares en masse, largely due to weaker-than-expected AI revenue guidance for Q3. Yet CEO Hock Tan reaffirmed on the earnings call that the company’s long-term target of $100 billion in annual AI chip sales by FY2027 remains unchanged. Q2 AI revenue stood at $10.8 billion—and with more custom-chip projects ramping up, significant growth lies ahead.

Premium Pricing Is Justified

Broadcom commands a roster of elite AI customers and continues steadily advancing toward its $100 billion annual revenue goal—giving it a demonstrably stronger competitive position than AMD. Investors may notice Broadcom’s stock trades at a higher valuation than AMD’s—but that premium is rational.

Caption: Forward P/S Ratio Comparison: AVGO vs. AMD. Source: YCharts

Analysts expect Broadcom’s growth rate to significantly outpace AMD’s—yet the valuation gap between the two remains modest. Especially following this recent pullback, Broadcom looks like the more compelling buy.