Semiconductor stocks Broadcom (AVGO 0.54%) and Marvell Technology (MRVL +18.33%) have delivered outstanding gains in 2024, with shares of both companies more than doubling as of this writing thanks to the rapidly growing demand for their application-specific integrated circuits (ASICs) and networking chips that are being deployed in data centers for tackling artificial intelligence (AI) workloads.
Broadcom stock is up 124% this year, and Marvell stock has logged gains of 93% as of this writing. But if you had to choose one of these two AI stocks for your portfolio right now following the gains that they have delivered in 2024, which one should you buy? Let's find out.
The case for Broadcom
The demand for AI-specific ASICs is growing as cloud service providers are looking to develop chips in-house to reduce their reliance on expensive semiconductors from the likes of Nvidia. This is where Broadcom steps in; it is reportedly manufacturing custom chips for major names such as Alphabet's Google, TikTok parent ByteDance, and Meta Platforms.
NASDAQ: AVGO
Key Data Points
This strong customer base has allowed Broadcom to make the most of the fast-growing custom AI processor market. The chipmaker generated $12.2 billion in revenue from sales of its custom AI chips and networking processors in fiscal 2024 (which ended on Nov. 3). That was a remarkable surge of 220% from the $3.8 billion in revenue that the company generated from AI chips in fiscal 2023.
The good part is that Broadcom is forecasting its AI-related addressable market to increase to a range of $60 billion to $90 billion by fiscal 2027. Management pointed out on the latest earnings conference call that the company is "very well positioned to achieve a leading market share in this opportunity and expect this will drive a strong ramp from our 2024 AI revenue base of $12.2 billion."
A key factor that will work in Broadcom's favor is its strong share of the ASIC market. J.P. Morgan estimates that it commands between 55% and 60% of the custom chip market. If that's indeed the case after the next three years and the company manages to corner even half of this space, its annual AI revenue could range from $30 billion to $45 billion (based on the company's estimated size of the custom AI chip market).
So, Broadcom's AI revenue has the potential to increase by a multiple of 2.5 to 4 in the next three years. This explains why analysts have bumped up their expectations for the current and the next two fiscal years.
AVGO revenue estimates for current fiscal year; data by YCharts.
The above chart points toward a nice acceleration in Broadcom's top line considering that it ended fiscal 2024 with organic revenue growth of 9% (excluding the acquisition of VMware, which was completed in November 2023).
The company finished fiscal 2024 with consolidated revenue of $51.6 billion. The chart above tells us that its revenue is expected to grow at healthy double-digit rates over the next three years.
As such, there is a strong chance that it could continue to remain a top AI stock as well, considering its share of the lucrative custom AI chip market.
The case for Marvell Technology
Marvell is considered to be the second-largest player in the market for ASICs, with an estimated share of 13% to 15%. However, the chipmaker has been gaining ground and is reportedly manufacturing custom AI chips for the likes of Alphabet, Microsoft, and Amazon.
NASDAQ: MRVL
Key Data Points
The demand for Marvell's custom AI processors seems robust as the company's data center revenue in the third quarter of fiscal 2025 (which ended on Nov. 2) increased by 98% from the same period last year to $1.1 billion. This outstanding growth offset the weak performance in the company's other business segments, which explains why overall revenue increased only 7% year over year to $1.52 billion.
However, the outlook for the current quarter indicates that things are improving rapidly. The company's revenue guidance of $1.8 billion for the current quarter points toward a year-over-year increase of 26%. That would be a big improvement over the previous quarter. It is expecting a similar jump in its earnings to $0.59 per share. For comparison, Marvell's bottom line increased by just 5% last quarter from the year-ago period.
This rapid improvement in financial performance can be attributed to the faster-than-expected growth in its AI business. The company was originally anticipating $1.5 billion in AI revenue in the current fiscal year, but it now believes that it will significantly exceed the full-year target. That's because of a faster-than-expected jump in the demand for its custom AI chips.
More importantly, Marvell is expecting its AI revenue to hit $2.5 billion in the next fiscal year, but the possibility that it exceeds that mark cannot be ruled out since Amazon and others have been expanding their relationship with the chipmaker.
Management says that it has "secured supply chain capacity to support our customers' growth forecast," suggesting that it may be able to clock faster growth by fulfilling more demand.
In the end, the growth of the company's AI business is so strong that the top line is expected to jump by 41% in the next fiscal year to $8.11 billion following an improvement of just 4% in the current year to $5.75 billion. Consensus estimates are projecting Marvell's impressive growth to last beyond the next fiscal year as well.
MRVL revenue estimates for current fiscal year; data by YCharts.
The solid top-line increase explains why Marvell's bottom line is expected to grow at a terrific pace over the next couple of fiscal years following a jump of just 3% in the current one to $1.56 per share.
MRVL EPS estimates for current fiscal year; data by YCharts.
So, even Marvell has the potential to remain a top AI stock, but is it a better buy than Broadcom?
The verdict
We have seen that both Marvell and Broadcom are set to deliver impressive growth. However, the former is expected to do it faster, as we saw in the charts earlier. That can be attributed to the company's smaller size and potential market share gains in custom AI chips.
This is also probably the reason Marvell is carrying a richer valuation than Broadcom.
AVGO PE ratio (forward 1y); data by YCharts. PE = price to earnings.
So, investors who are looking for an AI stock that can deliver faster growth can consider Marvell even though it is a tad expensive when compared to Broadcom. But at the same time, Broadcom's dominant position and big addressable market in AI chips means that investors probably won't go wrong with this name, either, if they are looking for a slightly cheaper stock.
