Which AI Stock, NVIDIA or Broadcom, Is the Better Bargain to Buy?

Core Viewpoint - The advancements in artificial intelligence (AI) have positioned NVIDIA Corporation (NVDA) favorably in the market, while Broadcom Inc. (AVGO) is also gaining attention due to its share repurchase plan and focus on AI [1][2]. Group 1: NVIDIA's Strengths - NVIDIA holds over 80% market share in the graphics processing unit (GPU) sector, providing a competitive advantage [2]. - There is significant demand for NVIDIA's new Blackwell chips due to their energy efficiency and faster AI interfaces, alongside steady demand for older Hopper chips [3]. - NVIDIA is well-positioned to benefit from the increase in AI data center spending, with top cloud computing companies investing $250 billion in AI data center infrastructure [4]. - NVIDIA's net profit margin is 55.9%, significantly higher than Broadcom's 18.5%, indicating more efficient profit generation [8]. - NVIDIA's return on equity (ROE) stands at 117.6%, outperforming Broadcom's 38.5%, showcasing better expenditure control and profitability [9]. Group 2: Broadcom's Strengths - Broadcom anticipates a surge in demand for its custom AI accelerator, with the market for execution processing units (XPUs) projected to grow from $12.2 billion last year to $60-90 billion by fiscal 2027 [5]. - Broadcom's XPUs are designed to outperform NVIDIA's GPUs on specific workloads and are more cost-effective [6]. - Broadcom has increased its dividends six times over the past five years, with a payout ratio of 52% of earnings, indicating a solid dividend-paying capability [10]. - Broadcom currently holds a Zacks Rank 1 (Strong Buy), while NVIDIA has a Zacks Rank 2 (Buy), reflecting differing market perceptions [14].