Better Semiconductor Stock: AMD vs. Broadcom

Broadcom's Performance and Strategy - Broadcom generated a strong free cash flow of $5.5 billion in Q4, up from $4.7 billion in the prior year, and raised its dividend by 11% to $0.59 per share [1] - Broadcom's share price reached a 52-week high of $251.88 on Dec 16, causing its P/E ratio to surge [2] - Broadcom's AI-related revenue rose 220% in fiscal 2024 to $12.2 billion compared to 2023's $3.8 billion, contributing to record full-year revenue of $51.6 billion, a 44% increase [12] - Broadcom's acquisition of VMware in November 2023 boosted its infrastructure business segment revenue by 196% year over year to $5.8 billion in Q4 [19][20] - Broadcom's CEO described 2024 as a transformative year, driven by AI and the VMware acquisition [9] AMD's Performance and Strategy - AMD anticipates Q4 revenue to rise to $7.5 billion, a double-digit increase over the prior year's $6.2 billion, driven by demand for accelerated computing [5] - AMD's AI demand supercharged its fiscal Q3 sales to a record $6.8 billion, an 18% year-over-year increase [11] - AMD's data center sales reached record revenue of $3.5 billion, a 122% year-over-year increase, due to its semiconductor products boosting AI system efficiency [17] - AMD is expanding its data center business through acquisitions, such as the expected deal to acquire ZT Systems in the first half of 2025 [15] - AMD sees growing demand for accelerated computing to support AI and data-intensive applications like 5G networks, creating a substantial market for its products [8] Industry Overview - The semiconductor industry had a strong 2024 with global sales up 19% year over year, and is forecasted to reach nearly $700 billion in 2025, up from $627 billion in 2024 [16] - The expanding AI market is expected to drive years of additional growth in the semiconductor industry [10] Comparison Between AMD and Broadcom - AMD's better valuation and lower exposure to risk in China (15% of sales) give it an edge over Broadcom, which has approximately one-third of its sales to Chinese customers [3][7] - Broadcom is more vulnerable to U.S. government tariffs and export restrictions on semiconductor products to China [7] - Both companies are seeing strong sales growth due to customer demand for AI-related products, making it a tough choice to pick just one for investment [13][14] - AMD's P/E ratio makes it a better value compared to Broadcom, whose P/E ratio surged after its Q4 results [2]