AMD vs. Broadcom: Which Semiconductor Stock Has Greater Upside?

Core Insights - Advanced Micro Devices (AMD) and Broadcom (AVGO) are significant players in the semiconductor industry, particularly in the AI sector, with both companies expected to benefit from the growing deployment of AI technologies [1][10] - The Semiconductor Industry Association (SIA) forecasts a 19.1% increase in semiconductor sales, reaching $627.6 billion in 2024, indicating strong market growth [1] AMD Insights - AMD is gaining traction in the cloud-data center and AI chip markets, with over $5 billion in data center AI revenues in 2024, driven by deployments from major clients like Meta Platforms and Microsoft [6][7] - The company’s EPYC instances increased by 27% in 2024, with over 1000 instances launched by hyperscalers [7] - AMD's next-generation MI350 series promises a 35 times increase in AI compute performance compared to its predecessor, with production on track for mid-2025 [8] - AMD has been actively acquiring companies to enhance its AI ecosystem, including ZT Systems and Silo AI [9] Broadcom Insights - Broadcom is experiencing strong demand for its application-specific integrated chips (ASICs) designed for AI and machine learning, which are essential for training Generative AI models [10] - The company is set to launch next-generation 3-nanometer XPUs, with volume shipments expected in the second half of fiscal 2025 [11] - Broadcom anticipates a 44% year-over-year increase in AI revenues for the second quarter of fiscal 2025, reaching $4.4 billion [13] - The serviceable addressable market for XPUs and networks is projected to be between $60 billion and $90 billion by fiscal 2027 [12] Financial Performance - Broadcom's fiscal 2025 earnings estimate is $6.60 per share, reflecting a 35.52% increase from fiscal 2024, while AMD's estimate remains steady at $4.59 per share, indicating a 38.67% growth [14][15] - Both companies have consistently beaten earnings estimates, with Broadcom showing a higher average surprise of 3.44% compared to AMD's 2.32% [16] Valuation Insights - Both AMD and Broadcom are considered overvalued, with AMD trading at a forward Price/Sales ratio of 3.77X, lower than Broadcom's 10.99X [17] - Broadcom is currently rated as a strong buy, while AMD holds a hold rating, indicating a preference for Broadcom in the current market [19]