The emergence of generative artificial intelligence (AI) was a massive catalyst for Nvidia (NVDA 1.46%). The company has long embraced AI and positioned itself to thrive in an AI-driven future. The company has ridden the AI wave to a $4 trillion valuation, making it the world's most valuable company.
Yet some investors have a short attention span, chasing the latest shiny object. Others fear that the adoption of AI will inevitably slow, or that the so-called bubble will burst, sending Nvidia stock plummeting. Despite the company delivering record-breaking results, doubts remain.
Broadcom (AVGO 1.07%) just provided the clearest evidence to date that demand for AI continues to accelerate.
Image source: Getty Images.
Like a broken record
Broadcom announced the results of its 2026 fiscal first quarter (ended Nov. 2), and the results were telling. The company delivered record revenue of $19.3 billion, up 29% year over year, driving adjusted earnings per share (EPS) of $2.05, an increase of 28%.
For context, analysts' consensus estimates were for revenue of $19.14 billion and adjusted EPS of $2.02, so Broadcom sailed past expectations.
Continuing demand for AI hardware lifted the company's results to fresh heights. AI-based revenue soared 106% year over year to $8.4 billion, marking the 12th consecutive quarter of AI-centric growth. Operating cash flow of $8.26 billion grew 35%, while free cash flow of $8 billion climbed 33% to 41% of revenue.
Broadcom gave investors other reasons to be bullish. CEO Hock Tan revealed that OpenAI was a new customer, and that the company's relationship with AI start-up Anthropic would expand from 1 gigawatt of Tensor Processing Unit (TPU) compute to 3 gigawatts in 2027. He also confirmed that Meta Platforms' custom accelerator development with Broadcom was "alive and well," despite published reports to the contrary.
NASDAQ: AVGO
Key Data Points
The chief executive also provided a robust second-quarter outlook, guiding for revenue of $22 billion, an increase of 47% year over year, well ahead of Wall Street's expectations of $20.4 billion. Broadcom tends to underpromise and overdeliver, so even its robust outlook might be conservative. Tan also expects AI semiconductor revenue to surge 140% to $10.7 billion.
What AI slowdown?
While the results are clearly a plus for Broadcom investors, they have broader implications. As I mentioned earlier, Nvidia reported record-breaking results, yet the stock fell in the wake of its blockbuster financial report. Broadcom's results -- and the accompanying commentary from management -- corroborate Nvidia CEO Jensen Huang's assertion during the company's earnings call that "agentic AI has reached an inflection point."
He has previously quashed talk of an AI bubble, "From our vantage point, we see something very different." Huang also suggested that AI adoption was moving downstream -- beyond the hyperscalers -- citing "an extreme diversity of customers" using its AI systems and chips.
NASDAQ: NVDA
Key Data Points
Tan said that demand for AI is accelerating. "Today, in fact, we have line of sight to achieve AI revenue from chips, just chips, in excess of $100 billion in 2027." For context, the company's total revenue for all of fiscal 2025 was less than $64 billion, underscoring the magnitude of the opportunity that remains.
That accelerating demand, by extension, paints a rosy picture for Nvidia. The company's graphics processing units (GPUs) are the gold standard for processing AI. Nvidia dominates the space, controlling 92% of the data center GPU market, according to IoT Analytics. Most experts concur that as AI adoption moves downstream, demand for these processors will rise, benefiting Nvidia along the way.
Since the dawn of AI in early 2023, Nvidia and Broadcom have both grown exponentially, delivering stock price returns of 1,150% and 467%, respectively. Based on their most recent quarterly results, the AI leaders continue to generate stunning growth, despite fears to the contrary.
On the other hand, the market uncertainty -- in the face of overwhelming evidence -- represents an opportunity for savvy investors looking to start a position in either of these industry heavyweights. Broadcom trades at 31 times forward earnings, while Nvidia trades at just 22 times forward earnings (as of this writing). Those are attractive multiples for companies poised to grow revenue by 47% and 77%, respectively, in the coming quarter.
I'd argue that the preponderance of the evidence suggests that Nvidia is a buy. As is Broadcom.
