Two of the biggest names in artificial intelligence (AI) investing are Nvidia (NVDA +0.93%) and Broadcom (AVGO +0.29%). Both companies' businesses benefit significantly from the AI arms race, which is why investors are so interested in them.
However, investors may be torn as to which one is the better stock to buy right now. So, if you're looking to add to one of these massive winners, which one should you pick?
Nvidia and Broadcom are competing for computing hardware market share
First, let's take a look at what each company does best.
Nvidia makes graphics processing units (GPUs) and various hardware and software to support their use. While GPUs got their start in gaming graphics, they can also be used to mine cryptocurrencies, process engineering simulations, and help autonomous vehicles navigate. These are large use cases but are dwarfed by the massive demand for GPUs from the AI sector.
GPUs are popular because they can process multiple calculations in parallel and be connected in clusters to further amplify this effect. Nvidia is the top GPU producer, and its stock performance backs up that statement.
NASDAQ: NVDA
Key Data Points
Broadcom is a much broader business than Nvidia. It has products ranging from mainframe computers and software to cybersecurity solutions and virtual desktop software. However, the two product lines that excite AI-focused investors are its custom accelerators and connectivity switches.
Broadcom's connectivity switches help direct traffic in data centers and are a vital part of making efficient systems. Its custom AI accelerators are a direct competitor to Nvidia's GPUs and are designed by Broadcom and its tech giant partners (like Alphabet (GOOG 0.20%) (GOOGL 0.55%)) to better handle AI workloads. But these custom accelerators will not dethrone GPUs, as they are only a better choice when a workload is specifically configured to be run through a Broadcom-designed accelerator.
Broadcom sees a huge market for these custom accelerators and believes it will be in the range of $60 billion to $90 billion by 2027. Given that Broadcom's AI revenue base was $12.2 billion in fiscal year 2024 (which includes its connectivity switches and custom accelerators), this would represent massive growth. It would also likely take market share away from Nvidia, which posted data center revenue of $115 billion in fiscal year 2025 (ending Jan. 26).
NASDAQ: AVGO
Key Data Points
While I'm not going to debate whether GPUs or custom accelerators will be the way of the future, it is important to watch some of Nvidia's biggest clients to see if they begin discussing using their proprietary designs solely or continue to order mountains of Nvidia GPUs.
While it's impossible to know how this will play out, one stock clearly looks like a better buy right now.
Nvidia's stock is far cheaper than Broadcom's
When comparing these two stocks' valuations, using a trailing earnings metric is impossible because Broadcom has a one-time effect that throws this metric out of whack. Instead, I'll use the forward price-to-earnings (P/E) ratio to assess each stock's valuation.
AVGO PE Ratio (Forward) data by YCharts
At 27 times forward earnings, Nvidia's stock is a fair bit cheaper than Broadcom's. This is noteworthy, as Nvidia is growing far faster than Broadcom.
While investors are excited about the prospects of Broadcom's AI hardware, the reality is that it only makes up a fraction of the company's total revenue. In 2024, its AI-related revenue was $12.2 billion, about 24% of total revenue. While these segments were growing quickly, they were drowned out by their overall business.
At face value, Broadcom looked like it grew 44% year over year, but Broadcom's VMware acquisition heavily influenced that. Without that purchase, Broadcom's revenue only grew 9% organically. Contrast that with Nvidia's fiscal year 2025 growth of $130.5 billion, up 114% year over year, and it's clear that Nvidia is the better stock to buy.
While Broadcom may be a darling in the market's eyes, it's clear that Nvidia is still the better stock to buy right now. With Nvidia's stock a bit weak following earnings, investors should use this opportunity to scoop up shares of this dominant AI player.
