The dawn of artificial intelligence (AI) saw Nvidia (NVDA +1.53%) take the pole position, as its graphics processing units (GPUs) provided the computational horsepower necessary to handle the rigors of AI. The stock has risen 1,160% since early 2023, fueled by unprecedented demand for its AI-centric chips.
However, 2025 saw a changing of the guard. Broadcom (AVGO 1.61%) stock outpaced Nvidia, rising 49% compared to 39% gains for Nvidia. Let's take a look at what's driving Broadcom higher and why I predict we could see a repeat performance in 2026.
Image source: Getty Images.
The next big winner
The speed and flexibility offered by GPUs made them the go-to for AI training and inference in the early days of the AI boom, but priorities have begun to shift. While Nvidia's chips are still best in class and demand remains high, the sheer magnitude of energy consumption has become a consideration.
That's where Broadcom's application-specific integrated circuits (ASICs) come in. These specialized AI chips can be customized, making them more energy-efficient for specific, repetitive tasks. As a result, data center and cloud operators are shifting the mix of their AI-capable chips, substituting Broadcom's ASICs for a portion of their GPUs to save energy and, ultimately, money. The trade-off is that these ASICs don't offer the same level of flexibility as GPUs, which can be deployed for a wide variety of high-performance computing tasks.
In the fourth quarter, Broadcom generated record revenue that accelerated 28% year over year to $18 billion, driving adjusted earnings per share (EPS) that jumped 37% to $1.95. The company left no doubt that AI was fueling the results, as its AI semiconductor revenue accelerated 74% year over year to $6.5 billion.
Management expects its AI-driven growth to continue. Broadcom's first-quarter forecast calls for AI semiconductor growth of over 100% to $8.2 billion, fueled by demand for AI accelerators and Ethernet AI switches.
NASDAQ: AVGO
Key Data Points
Don't take my word for it
Ark Invest founder and CEO Cathie Wood just released the firm's Big Ideas 2026 report, which examines disruptive and groundbreaking technologies. In the report, Wood lays out the case for ASICs:
Our research suggests that ASICs designed by companies like Broadcom ... will continue to take share as AI labs and hyperscalers search for cost-effective compute.
In short, Wood predicts that Broadcom will continue to "chip" away at Nvidia's share of the AI data center market. Furthermore, the report states that AI infrastructure investment (read "data centers") could exceed $1.4 trillion by 2030, which helps illustrate the magnitude of the opportunity.
Perhaps more intriguing is the company's valuation. Broadcom stock is currently trading at 31 times forward earnings, cheaper than Nvidia's multiple of 39. While that's still a premium, these AI chipmakers are leaders in the AI chip space, which is expected to drive their growth for years to come. That's why I own both.
That said, I predict that Broadcom stock will outpace Nvidia in 2026.
