Chipmakers Nvidia and Broadcom are benefitting from the surge in sales as big tech expands data centers. Broadcom’s AI revenue is growing rapidly, but its business is diverse. Big tech is projected to spend $375 billion on AI infrastructure this year, climbing to $500 billion next year. Nvidia dominates with GPUs for AI training, but others like Broadcom are also seeing strong sales. Broadcom’s stock has soared, but another semiconductor stock may join the $2 trillion club by 2028.
Broadcom’s AI chip business is thriving, with revenue growing 46% YoY to $4.4 billion last quarter. It expects $5.1 billion in AI semiconductor revenue this quarter, driving 60% growth. AI-related sales make up 30% of Broadcom’s revenue, set to increase in the coming years. Its acquisition of VMware boosts growth, with strong success in upselling customers to the VMware Cloud Foundation.
While Broadcom’s stock price has surged, it is costly with a forward P/E ratio of 45. Its AI chip and VMware businesses fuel growth, but overall revenue growth is around 20%. Investors should consider a semiconductor stock with a more reasonable valuation. Taiwan Semiconductor Manufacturing plays a crucial role in creating advanced semiconductors for companies like Broadcom and Nvidia. TSMC’s stock offers a better earnings multiple of 24 times expectations.
TSMC benefits from its technological lead, winning big contracts from companies like Broadcom and Nvidia. Its N2 process node commands a 66% premium over the previous generation, with strong demand for more power and energy efficiency. TSMC’s AI-related revenue is forecasted to grow mid-40% annually from 2024 to 2029, supporting overall revenue growth of about 20%. With a reasonable earnings multiple, TSMC presents a compelling investment opportunity.
Before investing in Broadcom, consider other stock options with potential for significant returns. The Motley Fool Stock Advisor identified the 10 best stocks for investors, excluding Broadcom. Stock Advisor has a total average return of 1,049%, outperforming the S&P 500. Don’t miss out on the latest top stock picks when you join Stock Advisor. Analysts predict that TSMC could reach the $2 trillion club by 2028, surpassing Broadcom’s growth potential.
Read more at Yahoo Finance: Prediction: This Artificial Intelligence (AI) Semiconductor Stock Will Join Nvidia, Microsoft, Apple, Alphabet, and Amazon in the $2 Trillion Club by 2028. (Hint: Not Broadcom)