AI Chip Showdown: Broadcom Poised to Surpass Nvidia by 2025
Tech Giants Seek Diversification
Fund manager Stephen Yiu of Blue Whale Growth Fund predicts that Broadcom Inc. will yield substantial returns for investors by 2025, potentially outperforming AI chip heavyweight Nvidia Corporation. This forecast comes as tech giants like Microsoft Corporation, Google LLC, and Meta Platforms Inc. look to broaden their AI chip supplier base.
Custom Chips on the Rise
Despite substantial purchases of Nvidia’s GPUs, these companies are now creating their own custom chips for AI applications. This shift is driven by the need to reduce dependence on a single supplier. Yiu sees Broadcom as the next Nvidia in terms of potential outperformance, thanks to its strong partnerships with major tech firms.
Broadcom’s AI Ambitions
Broadcom’s year-to-date returns have climbed 103.42% this year, with a market cap of over $1 trillion after announcing that its AI revenue tripled to $12.2 billion in 2024. The company is working with three major cloud computing customers, Meta, Alphabet, and ByteDance, to develop custom AI chips.
A More Attractive Investment Opportunity
Yiu has significantly cut his fund’s investment in Nvidia, viewing Broadcom as a more attractive opportunity due to its smaller size. “For a $1 trillion company to grow 50% to become $1.5 trillion is reasonable. But for Nvidia to do that, they would need to add another $1.5 trillion, which is a very big number,” he explained.
The AI Boom
Big tech companies like Google, Meta, and ByteDance are investing heavily in designing custom processors to accelerate the training and deployment of AI systems. Even OpenAI and Apple have partnered with Broadcom to develop their AI server chips, diversifying their exposure to Nvidia.
Insider Confidence
Former House Speaker Nancy Pelosi, known for her active stock market investments, disclosed in June that she had acquired call options on Broadcom. These options, set to expire in June 2025, have drawn significant attention to her stock holdings.
High-Yield Investment Opportunities
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