Graphics processing units (GPUs) have been the go-to chips for hyperscalers and artificial intelligence (AI) companies in the past three and a half years. That's not surprising, as GPUs pack massive parallel computing power, making them ideal for carrying out vast calculations simultaneously that are needed for AI model training and inference.
However, GPUs have been losing ground to another type of chip known as application-specific integrated circuits (ASICs). These ASICs, popularly known as custom processors, are designed for specific tasks. As a result, they differ from GPUs, which are general-purpose chips. Since ASICs are custom-made to perform a specific task, they are reportedly 30% to 40% more power-efficient than GPUs while offering better performance.
Not surprisingly, custom AI chips are better suited for AI inference applications, which don't require the horsepower needed to train AI models. As a result, TrendForce expects sales of ASICs to increase by 45% in 2026, well above the 16% anticipated increase in GPU shipments.
Investors can capitalize on this fast-growing AI niche by investing in shares of Broadcom (AVGO 0.12%) and Marvell Technology (MRVL +2.17%), the two leading players in ASICs. But if you were to invest in one of these two semiconductor stocks right now, which one should you be buying?
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Broadcom and Marvell Technology both growing at a solid pace
The latest results from Broadcom and Marvell, released this month, clearly show that both companies are benefiting nicely from the adoption of custom AI chips in data centers. Marvell reported a 22% year-over-year increase in revenue in its fiscal 2026's fourth quarter (which ended on Jan. 31) to $2.22 billion. Its adjusted earnings increased by an even more impressive 33% to $0.80 per share.
Marvell's data center business has received a nice shot in the arm thanks to the adoption of its networking components and custom processors. The company points out that its custom processor revenue doubled in the previous fiscal year. What's more, it anticipates revenue from sales of networking switches to double in fiscal 2027.
NASDAQ: MRVL
Key Data Points
With the data center business accounting for 74% of Marvell's revenue in the previous quarter, it is easy to see why the company has raised its full-year guidance to $11 billion. Marvell was originally expecting fiscal 2027 revenue to land at $9.5 billion, but it has significantly increased that expectation, as it is on track to start ramping up the production of several custom AI chip programs this year.
What's more, Marvell seems confident of achieving robust growth in the custom AI business over the next couple of fiscal years, as it is looking to manufacture more than 20 types of chips for its customers. This explains why the company has guided for $15 billion in revenue for fiscal 2028, which would be an improvement over the growth it is likely to clock this year.
This strong momentum that Marvell is projecting explains why analysts forecast terrific earnings growth.
MRVL EPS Estimates for Current Fiscal Year data by YCharts
A similar story is unfolding at Broadcom, which released its fiscal 2026 Q1 results (for the three months ended Feb. 1) on March 4. The chip designer's top line increased 29% from the year-ago period, while adjusted earnings increased almost identically to $2.05 per share. So, there wasn't much difference in Broadcom's and Marvell's growth rates last quarter.
However, there is a strong likelihood that Broadcom will pull ahead. That's because Broadcom is the leading player in custom AI processors. Counterpoint Research expects it to command 60% of the custom AI chip market in 2027.
This robust market share is why Broadcom's AI revenue is growing much faster than Marvell's. After all, Broadcom reported a 106% year-over-year increase in its AI revenue in the previous quarter to $8.4 billion.
Marvell's data center business, on the other hand, clocked 21% growth from the year-ago period. What's more, Broadcom anticipates a significant acceleration in AI revenue growth in the current quarter to $10.7 billion, a potential increase of 143% from the year-ago quarter. For comparison, Broadcom posted a 46% increase in its AI revenue in the same quarter last year.
Moreover, Broadcom's commanding position in the custom chip market explains why it is confident of achieving at least $100 billion in AI revenue in fiscal 2027. The company says that it has already secured the supply chain needed to hit this milestone, which should allow it to serve top customers such as Anthropic, Meta Platforms, Alphabet's Google, and OpenAI.
Like Marvell, Broadcom is poised to clock outstanding earnings growth.
AVGO EPS Estimates for Current Fiscal Year data by YCharts
Which one should you be buying right now?
Both Marvell and Broadcom are on track to make the most of the secular growth of the custom AI chip market, suggesting that investors can't go much wrong if they invest in either of these two AI stocks. However, value-oriented investors may prefer Marvell over Broadcom. The chart shows why.
MRVL PS Ratio data by YCharts
Marvell trades at a cheaper valuation, making it a more ideal investment for investors looking for a value stock in the AI sector, as it may have the potential to clock greater upside. After all, the market may reward Marvell with a premium valuation, paving the way for solid gains.
Meanwhile, Broadcom's premium valuation can be justified by its dominant market share in custom AI chips and the massive acceleration in growth it expects. So, investors with a higher risk appetite and looking for the best-of-breed custom AI chip stock can consider Broadcom, even though it trades at a more expensive valuation than Marvell.
