Nvidia (NVDA +1.34%) and Broadcom (AVGO +3.35%) have become two of the clearest ways to invest in the artificial intelligence (AI) infrastructure build-out. One designs the graphics processing units (GPUs) that train the largest AI models; the other builds custom chips and networking gear for the cloud companies racing to expand their data centers. And both have handed shareholders enormous gains over the past two years.
But Broadcom reported fiscal second-quarter results on June 3, and the stock fell sharply the next day even though the quarter set records. Nvidia, meanwhile, has recovered from its recent pullback and is trading not too far from its 52-week high.
With two fresh reports from both companies and a sharp drop in Broadcom's stock, it's a good time to look at shares of both companies.
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Nvidia: growth keeps accelerating
Nvidia's most recent quarter showed an AI boom still gathering speed. In its fiscal first quarter of 2027 (the period ended April 26, 2026), revenue rose 85% year over year to $81.6 billion, accelerating from 73% growth the prior quarter and 62% the quarter before that. And its data center business -- the heart of the AI build-out -- grew even faster, up 92% to $75.2 billion.
NASDAQ: NVDA
Key Data Points
Despite such a strong quarter, the stock's valuation isn't wildly expensive. Nvidia shares trade at a forward price-to-earnings ratio of about 25 as of this writing. That's not an unreasonable multiple given Nvidia's strong business growth. On the other hand, it leaves little cushion if AI spending cools.
The larger question hanging over Nvidia, however, is its customers.
The cloud giants that account for a large share of its data center revenue are designing their own chips to lean less on Nvidia's pricey GPUs. For now, it looks like Nvidia can keep growing while those efforts ramp, but its pricing power could soften once buyers have credible alternatives.
Broadcom: a sharp drop on a record quarter
Broadcom's AI business is expanding even faster -- but off of a smaller base. Its AI semiconductor revenue surged 143% year over year to $10.8 billion in its fiscal second quarter of 2026 (the period ended May 3, 2026), up from 106% growth in fiscal Q1. Total revenue climbed 48% to $22.2 billion, and non-GAAP (adjusted) earnings per share rose 54%.
Further, management said it expects AI chip revenue to roughly triple from a year earlier to about $16 billion this quarter.
NASDAQ: AVGO
Key Data Points
So why did the stock fall?
First of all, expectations were high, as shares had climbed nearly 40% this year heading into the report. Given this backdrop, it likely disappointed some investors when management simply reaffirmed its fiscal 2027 AI revenue target rather than raising it.
"We expect this momentum to continue into fiscal year 2027 and reiterate our AI semiconductor revenue guidance to be in excess of $100 billion," said Broadcom CEO Hock Tan in the company's fiscal second-quarter earnings call.
He also noted that its largest customer would likely rely on more than one chip supplier, and that the fast-growing AI business is weighing on the company's overall gross margin.
Still, the long-term story looks intact. Broadcom designs custom AI accelerators for a handful of the world's biggest cloud companies -- including Alphabet, Meta Platforms, OpenAI, and Anthropic, making it a direct beneficiary of the same build-your-own-chip trend that threatens Nvidia.
Of course, Broadcom's concentrated dependence on these massive customers cuts both ways: with so few customers driving most of the AI growth, losing ground with any one of them would sting.
Further, Broadcom stock similarly isn't cheap. Even after the drop, the stock trades at a forward price-to-earnings ratio of about 27 -- a slight premium to Nvidia.
The better buy
Neither stock is a clear bargain. Indeed, both trade at premium valuations on forward earnings, so the deciding factor when comparing these two arguably isn't price. Instead, it comes down to risk and timing.
The recent trend from chipmakers' customers to increasingly prioritize custom silicon arguably poses a credible threat to Nvidia, while it's a catalyst for Broadcom. Add in Broadcom's soaring AI revenue, and the company's stock starts to look attractive.
Nvidia, of course, remains an extraordinary business, and its lead in AI chips is undeniable. But after this week's drop, Broadcom arguably looks like the more attractive stock.
