I get nervous whenever I see a stock trading higher after reporting subpar earnings and lowered guidance. And when that stock's valuation commands a higher premium than the current market leader, it makes for an exceptionally risky situation. Broadcom (NASDAQ: BRCM) has presented this exact scenario. But here's the problem: It's tough to discount Broadcom's mobile prospects, especially when it has such close ties to Apple (NASDAQ:AAPL) and Samsung. And the company has an impressive way of leveraging good technology into more new products and markets. But it's not alone.

I see your ace, I raise you two
The dominance of Qualcomm (NASDAQ:QCOM) remains an overhang -- and for good reason. On the heels of its typical "beat-and-raise" quarter, Qualcomm rattled the chip sector by announcing its new chip, the RF360 Front End Solution, which eliminates radio frequency band fragmentation -- the biggest headache for device manufactures. While this was in response to NVIDIA (NASDAQ:NVDA), which earlier declared war on the chip sector, Broadcom felt the effects.

On Monday at the Mobile World Congress, Broadcom struck back and issued its own challenge by announcing the BCM61630, a digital baseband processor and RF transceiver designed for 3G femtocell residential access points. This is the first fully integrated chip of its kind. But the chip giant didn't stop there. Broadcom also announced the BCM85625 Series, which included a new high modulation microwave system-on-a-chip, or SoC that is optimized for high-speed wireless connectivity in 4G LTE networks. Broadcom says this chip family enables 50% higher capacity, while allowing carriers to be more efficient in their broadband delivery services.

The timing of these new product announcements is not coincidence. They all have arrived immediately following the release of NVIDIA's first fully integrated 4G LTE mobile processor chip called the Tegra 4i, which was said to be a direct rival to Qualcomm's Snapdragon S4. And according to Nvidia, it is faster yet half the size of its nearest competitor. All of this back-and-forth reminds me of a high-stakes poker game. And it's starting to look as if whoever has the most chips to wager is going to outlast the other.

Who's bluffing who?
However, despite NVIDIA's bold talk, Broadcom is making it known that it has its sights set on Qualcomm, which is the market leader in baseband chips with a 52% share. And given that mobile/wireless comprises of almost 50% of Broadcom's revenue, you can understand why. But taking on Qualcomm in the LTE baseband market comes with great risk. And it may prove futile in the end. For instance, on Feb. 12, Broadcom announced the BCM21892, the company's first LTE-compatible baseband chip that supports all 4G LTE bands. The company said it was 35% smaller compared to current products, making it the industry's smallest 4G LTE chip in the market.

That's all well and good. But the management didn't guide as if it felt any of these products were going to matter. While issuing fourth-quarter results just two weeks prior to these product releases, management projected first-quarter revenue to arrive at $1.9 billion, give or take 4%. This meant that even if Broadcom reached the high end of $1.97 billion, it would still suggest a 5% sequential drop. Conversely, NVIDIA CEO Jen-Hsun Huang told analysts, "My expectation is that we'll gain market share this year or we'll continue to gain market share this year." Now that's a company that believes in its business. Along similar lines, not only did Qualcomm raise guidance, but the company is projecting 17% growth in handset licenses for this year, which means it plans to squeeze every bit of business it can in the market. Qualcomm believes in its hand. The same confidence is not seen in Broadcom -- at least not yet.

Not time to fold yet
This sector has gotten nasty and will likely remain that way for a while. And although Broadcom has been dominant in its own right, the company is constantly looking over its shoulder. The soft guidance notwithstanding, better performances are on the way. As noted, with two behemoths like Apple and Samsung driving revenue, there are plenty of reasons to be bullish. Apple's lower-priced iPhone should be a major driver for Broadcom. And not only is Apple ramping up iPhone distribution in China, but this coincides with the anticipation for an iPhone 5S.

Meanwhile, there's Samsung's Galaxy S IV, which is expected to be released next month. Broadcom should be the beneficiary of all of this pent-up demand. But it's also a catalyst for Qualcomm. But unlike Qualcomm's chip, which is slated for release in the second half of the year, Broadcom's BCM61630 is due out in the first half. It makes sense to think that Apple's smaller iPhone would require a smaller RF chip; another potential advantage for Broadcom. It is now NVIDIA's hand to play.