NVIDIA vs. Broadcom: Which AI Chip Stock Is the Better Buy Now?

Core Insights - NVIDIA Corporation (NVDA) and Broadcom Inc. (AVGO) are pivotal players in the current artificial intelligence (AI) boom, supplying essential technology for AI infrastructure [1][2] NVIDIA Overview - NVIDIA designs powerful graphics processing units (GPUs) that are crucial for training and running advanced AI models [2] - In the third quarter of fiscal 2026, NVIDIA's revenues surged 62% year over year to $57 billion, with non-GAAP earnings per share (EPS) increasing 60% to $1.30 [5] - The Data Center business is NVIDIA's primary growth driver, generating $51.22 billion in revenues, accounting for 89.8% of total sales, marking a 66% year-over-year increase [7] - NVIDIA's partnership with OpenAI is expected to enhance long-term demand for its GPUs, solidifying its position as a leading supplier of AI chips globally [9] Broadcom Overview - Broadcom supplies networking chips and custom ASICs that enhance the efficiency of hyperscale data centers handling AI workloads [10] - In the fourth quarter of fiscal 2025, Broadcom's revenues increased 28.2% year over year to $18.02 billion, with non-GAAP EPS rising 37.3% to $1.95 [11] - Broadcom's AI revenues reached $20 billion in fiscal 2025, growing 65% year over year, with expectations to double to $8.2 billion in the first quarter of fiscal 2026 [12] - The company has a substantial AI-related order backlog of $73 billion, which is nearly half of its total consolidated backlog of $162 billion [13] Growth Outlook - NVIDIA's EPS growth outlook appears stronger, with a projected 57.1% increase for fiscal year 2027 compared to Broadcom's 49.9% for fiscal year 2026 [15] - Long-term expected EPS growth for NVIDIA is 46.31%, significantly higher than Broadcom's 35.66% [16] Valuation Comparison - Broadcom currently trades at a forward 12-month price-to-earnings (P/E) multiple of 28.66, while NVIDIA trades at 24.76, indicating that investors are paying a premium for Broadcom despite its lower earnings growth profile [17] Conclusion - NVIDIA is positioned as the better investment option due to stronger earnings growth prospects, direct exposure to AI compute demand, and a more favorable valuation compared to Broadcom [20]