The semiconductor industry is experiencing significant growth as investments in AI-driven data centers surge. According to IDTechEx, the AI chip sector is projected to surpass $400 billion by 2030.
Although Nvidia remains a favorite among investors, it's worth looking at Broadcom ( AVGO -2.01%) as well.
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Reasons to consider Broadcom for long-term investment
Nvidia faces a challenge with the high total cost of its chips. While they are unmatched in performance, they are also costly and consume a lot of energy. There is increasing interest in more budget-friendly chips that, although less powerful than Nvidia’s, are optimized for particular applications—this is where Broadcom excels.
Broadcom anticipates its AI-related revenue will climb to $120 billion by 2030, a significant jump from $20 billion this year. To put this in context, the company’s total revenue over the past twelve months stands at $60 billion.
In addition to its chips, Broadcom provides sophisticated networking technologies that enable efficient data handling for AI training processes. As CEO Hock Tan recently mentioned at a Goldman Sachs event, "The network becomes the computer," highlighting the importance of networking alongside chips.
With its range of specialized AI chips, known as XPUs, and advanced networking products, Broadcom is well-positioned to address the growing need for greater computing capabilities. Last quarter, the company’s overall revenue increased by 22% year over year, while its AI segment soared by 63%, now accounting for about one-third of total sales.
Broadcom has consistently demonstrated strong operational performance. Over the past decade, its stock has surged 2,500%. The company’s $120 billion AI revenue goal underscores management’s belief in the expanding demand for AI computing and highlights Broadcom’s unique strengths in capturing this market opportunity.
