The demand for application-specific integrated circuits (ASICs) has been booming due to their deployment in data centers that handle artificial intelligence (AI) workloads. These ASICs are designed to perform a specific function, unlike general-purpose compute chips that handle multiple tasks.
The specific nature of these custom ASICs means they deliver better performance and higher power efficiency than general-purpose chips. Not surprisingly, shipments of custom ASICs are predicted to triple between 2024 and 2027, according to Counterpoint Research. Marvell Technology (MRVL 10.16%) and Broadcom (AVGO 2.47%) are the dominant players in custom ASICs, which helps explain their solid growth.
But if you have to buy one of these two AI stocks right now to capitalize on the ASIC boom, which one should you go for? Let's find out.
Image source: The Motley Fool.
Broadcom and Marvell Technology's growth will accelerate thanks to custom ASICs
Broadcom is the bigger player in custom AI chips with an estimated market share of 70%. So, it is easy to see why its AI revenue is growing at a significantly stronger pace. Broadcom's AI semiconductor revenue shot up by 143% in the second quarter of fiscal 2026 to $10.8 billion. That was an improvement over the 106% year-over-year increase seen in fiscal Q1.
NASDAQ: MRVL
Key Data Points
The company is anticipating a much stronger increase of over 200% in its AI revenue this quarter to $16 billion. What's more, Broadcom has a $100 billion AI revenue forecast for fiscal 2027, suggesting that its strong market share in custom ASICs is going to power stronger growth next year. Marvell Technology, on the other hand, is anticipating a 20% increase in custom AI chip revenue this fiscal year, followed by an increase of more than 100% in the next fiscal year.
Marvell management estimates that its annual custom silicon revenue could exceed $10 billion by fiscal 2029. Broadcom, therefore, is way ahead of Marvell in this space. This is also evidenced by the financial performance of both companies. Broadcom reported a 48% increase in its consolidated revenue last quarter, along with a 54% year-over-year increase in earnings.
Marvell's growth was muted in comparison. Its revenue increased 28% year over year, while earnings per share jumped by 29%. Analysts expect Broadcom's stronger market position to translate into a higher earnings growth rate over Marvell. Specifically, Broadcom's earnings are projected to increase by 70% this fiscal year, followed by a 67% spike next year. Marvell's earnings are anticipated to jump by 42% this year, followed by a 52% increase next year.
So, Broadcom is looking like the better custom ASIC stock of the two by far.
The verdict
Marvell stock has shot up by 209% this year, while Broadcom's returns have been poor at just 7%. However, this massive contrast in their stock market fortunes has made Marvell expensive.
Data by YCharts
The valuations explain why Broadcom's 12-month median price target of $525 suggests 41% upside from current levels, while Marvell's 12-month median price target of $240 points to a 14% slide. So, Broadcom's stronger prospects and cheaper valuation make it the better custom semiconductor stock to buy right now, as it may not be long before the market starts rewarding it for its phenomenal growth.
