Nvidia (NVDA +1.34%) and Broadcom (AVGO +3.35%) are two of the best investments you can make right now in the stock market, let alone the artificial intelligence (AI) sector. These two have massive upside over the next few years, yet a look at their valuations suggests the market has not priced in any growth, unlike with some of their AI peers. That points to an investment opportunity, and investors might want to take advantage before the market figures things out.
A $10,000 investment (or any amount) split between these two should deliver fantastic returns over the long term. Once investors see their 2030 valuation estimates, it will be clear that these two are smart buys.
Image source: Getty Images.
Data centers are being built everywhere
Nvidia and Broadcom provide important components in the hardware that fuel AI computing. Nvidia offered the best general-purpose computing products at the start of the AI race, and this helped it build a first-mover advantage. Now its products are associated heavily with AI computing.
However, Nvidia's graphics processing units (GPUs) aren't always the best tool for the job. Sometimes, the flexibility of a GPU isn't needed, and a more specialized computing unit makes more sense economically. That's where custom AI chips from Broadcom gain the advantage, as its computing units are designed specifically with an end user's workload in mind.
NASDAQ: AVGO
Key Data Points
Neither company's products will completely replace the other. They are great complements to each other, and each one has a strength and a weakness. Combined, these two provide a great computing solution that many AI hyperscalers have already deployed in tandem.
But where are these two companies headed by 2030? Each has very strong long-term guidance that shows us the path.
The AI build-out is far from over
Broadcom's short-term guidance is downright incredible. It expects around $115 billion in AI semiconductor revenue in 2027, doubling to $230 billion in 2028. Nvidia told investors during its most recent earnings call that it expects 70% revenue growth during 2027. Those are strong growth rates, but they don't project out to 2030.
NASDAQ: NVDA
Key Data Points
For that, I'll use Nvidia's long-term call that data center capital expenditures will reach $3 trillion to $4 trillion by 2030. What's noteworthy about this forecast is that Nvidia management believes the big five AI hyperscalers will spend about $800 billion on capital expenditures this year. When other players are added in, that figure could reach around $1 trillion. So, the market size is forecast to triple or quadruple by 2030.
Another factor that will boost these two is that spending on these computing unit providers will increase by 2030. Right now, a lot of money is being spent on acquiring land and building the physical facilities. Once those facilities are operational, the cost burden shifts more toward the computing side, which will give companies like Nvidia and Broadcom an even greater share of revenue.
If Nvidia's projections prove true, it's not unreasonable to expect these two to triple or quadruple their revenue by 2030. None of this is really priced in, as Nvidia and Broadcom both trade at reasonable forward-earnings valuations.
Data by YCharts.
That means this revenue growth is more likely to stoke stock price appreciation, suggesting Broadcom and Nvidia's stocks could deliver a 3x or 4x return over the next few years. Considering how well these two have already done, that's a great return.
Given all these estimates, it wouldn't be hard to see that, by the end of 2030, a $10,000 split between Nvidia and Broadcom would be worth between $30,000 and $40,000. That's a monster return in a short time frame, and I think there is plenty of demand to help these two to deliver that level of return.
