Key Points
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Nvidia expects huge growth from its next chip generation.
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Broadcom is carving out a massive market for its custom AI chips.
Nvidia (NASDAQ: NVDA) and Broadcom (NASDAQ: AVGO) are two of the top ways to invest in the artificial intelligence (AI) space. Many investors (like myself) may own both. However, there can only be one best buy for April.
Let’s take a look to see which stock has the advantage heading into April and what kind of upside is ahead.
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A group of three investors comparing Nvidia and Broadcom’s stock with illuminated monitors on either side of them.
Image source: Getty Images.
Both Nvidia and Broadcom are playing out a multiyear investment opportunity
Nvidia has been the go-to AI computing unit provider since the AI build-out began in 2023. Its general purpose graphics processing units (GPUs) remain the industry standard for accelerated computing. Although Nvidia’s current product lineup is impressive, the company is still pushing the limits of what’s possible with the launch of its new Vera Rubin chip architecture, which will be available for use later this year. Those chips can perform the same tasks as the current Blackwell generation but need four times fewer chips to perform training and 10 times fewer to perform inference.
While clients could purchase fewer chips to get the same performance as the Blackwell chips, what they will really do is purchase as many chips as their budget will allow, leading to huge growth for Nvidia. By the end of 2027, Nvidia expects lifetime sales of Blackwell and Rubin chips to tally $1 trillion — up from the $500 billion it expected by 2026. That’s monster growth for Nvidia, but Broadcom has an impressive growth in store as well.
Broadcom also competes in the AI computing game, although it’s approaching it from a different angle. Instead of offering a broad-purpose GPU like Nvidia, it partners directly with AI hyperscalers to design their own custom AI chip. While these chips won’t have the flexibility or multitask capability of an Nvidia GPU, they are optimized for a specific task and can outperform GPUs in price and performance when the two units only do that specific task.
There is a massive and growing opportunity for Broadcom to capture in this realm. By the end of 2027, Broadcom expects custom AI chips to generate $100 billion in revenue. For reference, the division these chips are currently accounted in grew its revenue at a 106% pace to $8.4 billion during its last quarter. That means Broadcom’s revenue for this segment should at least triple between now and then.
While both companies are giving investors projections through 2027, the reality is that the AI build-out is expected to last through at least 2030. Nvidia believes that global data center capital expenditures will rise to $3 trillion to $4 trillion annually by the end of 2030. That gives both companies an even greater growth runway and shows that each is worthy of an investment and primed to fly over the next few years.
But which is the best buy right now?
Nvidia’s stock looks cheaper
As for the best buy right now, I’m giving that edge to Nvidia. It has two things going for it that matter more for short-term price movement: growth and valuation.
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During their last quarter, Nvidia’s growth rate was higher than Broadcom’s.
AVGO Revenue (Quarterly YoY Growth) data by YCharts.
Furthermore, Nvidia is cheaper from a forward price-to-earnings standpoint.
AVGO PE Ratio (Forward) data by YCharts.
While I would be comfortable buying both stocks today, I think Nvidia is the better buy for April. Now, the question turns to whether Nvidia’s stock can return to its normal, market-beating self this month. I think most of that depends on geopolitical outcomes, specifically what’s going on in Iran. If that conflict wraps up, the market may be ready to take on more risk, and these two stocks could soar.
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Keithen Drury has positions in Broadcom and Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.