The Megatrend of The Megatrend (AI) has raised several companies to values above the trillion-dollar mark. The most outstanding Invidi(NASDAQ: NVDA)but one of the investors should wait for the eye -Omumvamo(Nasdaq: avgo) – Rising star due to ACCHER for its ACCELERATION Accelerator.
These brands have a small customer base now, but could see more adoption in the coming years. This would allow Nvidia to expand its market share overnight and allow it to grow at a faster pace. Broadcom is currently valued at $1.7 trillion, making it worth $2 trillion internally. In fact, I think the feed could easily grow to that level in the next year if it continues to capture market share at its current pace. And that would be a start.
Image Source: Getty Images.
Broadcom doesn’t just focus on AI, or even computing hardware. It has a burning business ranging from Virtual desktop software (with its acquisition of vMware in late 2023), mainframe hardware and software, and cybersecurity. In fact, its AI revenue was $5.2 billion during its third quarter, which ended in Aug. 3, compared to $16 billion in revenue. However, AI’s broad currency is growing rapidly, and recently it has another force.
Broadcom’s AI revenue comes from two categories of hardware: communication switches and custom AI accelerators. Communication switching helps data centers to restore data immediately after it has been processed across multiple computing units. These are important devices and are already widely used, but the market value corresponds to the value of the customized AI acceleration, which the company calls XPUS, which the company can qualify for.
Broadcom designs its XPUS in collaboration with the end user, adapting their designs to fit the workloads they will see. This is a big advantage when compared to graphics processing units (GPUS). Nvidia and its peers are designing those processors with more complex lines, so the GPUS are more flexible. However, when the GPU is only configured to see one type of load over its lifetime, this compromise is a waste of cost. In the early days of the artificial intelligence empire, companies didn’t know what their jobs would look like, which made Nvidia’s GPUS a great product to go with. Now that workloads are more established, expect xipcom’s XPUS to skyrocket in the next few years.
Does that mean who owns Nvidia and GPU? That’s not the case. A large part of the ai computing market still wants the flexibility of Nvidia GPUS, and many companies that need compatible processors cannot partner with Broadcom to design special chips. Currently, Broadcom is only shipping chips to five XPU customers, although there are several more in the development pipeline. One major client that recently came on board is AI powerhouse Outrai, which plans to buy 10 gigawatts (GW) of computing power. That makes broadcom’s deal bigger than the 6 gw bid at Vulai hit They are alone(Nasdaq: amd) and equals its 10 gw confrontation with nvidia.
Nvidia is already big – indeed, it’s the biggest company in the world – and the Opelai partnership is a big deal for it. Broadcom’s similar and sizeable investment will give the smaller company even more leverage.
At best, it could be something that increases the consideration of broader product considerations by other technology players. This could be the spark that helps lift it above the $2 trillion market cap in the near future.
Another broader problem could be the expensive valuation of the stock. The market already has a lot of packs expected from the current share price, which is why it carries a premium price compared to the market leader nvidia.
NVDA PE Ratio (forward) ycharts data.
A price-to-earnings rating of 53 isn’t cheap, but neither is Nvidia’s rating of 42. In addition, investors must focus on that BOOMCOM This means that broad growth rates will always be slower than nvidia, even if its AI-related revenue is growing at a faster rate. (Broadcom’s related revenue grew at a 63% pace in its fiscal Q3.)
NVDA Revenue (Quarterly Yoy Growriod) Data by Ycharts.
If Broadcom’s valuation gains a bit, it will need to deliver strong growth just to make up for its current share price. Time will tell if that happens, but with the increasing production of its XPUs, I think it will easily deliver the growth needed to make its value acceptable.
I think the feed will continue to rise in popularity as an investment, and that its market cap will cross the $2 trillion mark soon enough to increase its current share price to get an idea.
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Keithen Drury has positions in Futures and nvidia. Motley Fool ranks and recommends advanced micro devices and nvidia. The Motley Fool recommends feeding. The Motely Fool has a disclosure policy.
Prediction: This Artificial Intelligence (AI) Stock Could Be a $2 Trillion Giant was originally published by The Motley Fool
