There's a Part of AI That Nvidia Can't Monopolize -- and This Stock Owns It

Some investors assume Nvidia (NASDAQ: NVDA) will dominate every critical part of the artificial intelligence (AI) infrastructure technology stack. But that assumption is flawed.

Hyperscalers are increasingly focused on lowering the cost of running AI models at scale and building custom infrastructure. That shift in focus has created a major long-term opportunity for Broadcom (NASDAQ: AVGO). Let me explain.

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Hyperscalers want more control

The clearest evidence of the shift can be seen in what some of Nvidia's own biggest customers are doing. In April 2026, Meta Platforms expanded its partnership with Broadcom through 2029 to codevelop multiple generations of custom AI processors. Broadcom's Ethernet networking technology will also help connect Meta's AI infrastructure.

Alphabet extended its custom AI chip partnership with Broadcom through 2031 in April 2026. The company already benefits commercially from that relationship. It's helping design Alphabet's custom Tensor Processing Units (TPUs) used for Anthropic's 1-gigawatt TPU compute deployment.

This suggests hyperscalers increasingly want more control over how their AI infrastructure is built and scaled, while also reducing dependence on Nvidia alone. Hence, management expects Broadcom to earn more than $100 billion in AI chip revenue in 2027.

Broadcom has a networking edge

Broadcom also supplies the networking technology that enables these custom chips to communicate across massive AI data centers.

Nvidia is also a major force in AI networking, especially through technologies like InfiniBand and NVLink that connect multiple GPU systems. But hyperscalers building out giant AI data centers often need to connect thousands of servers across much larger AI systems. Here, Broadcom's Ethernet-based networking can offer greater flexibility, interoperability, and lower costs.

That opportunity may be growing faster than many investors realize. In May 2026, research firm Evercore stated that its latest channel checks showed strong AI networking demand that remains constrained by supply. Broadcom is well-positioned to benefit from this dynamic, as its Ethernet and connectivity technologies are already playing an important role in hyperscaler AI infrastructure.

VMware expands Broadcom's AI opportunity

Broadcom's VMware acquisition also gives it exposure to the growing demand for enterprise AI infrastructure. Many businesses prefer to run AI applications in their own data centers (private deployment) or across a mix of private and public cloud systems (hybrid deployments). That matters because many companies, especially in industries like finance and healthcare, may not want all their AI systems running entirely on public cloud platforms, where data control, compliance, and security can become bigger concerns.

Broadcom recently strengthened that strategy with VMware Cloud Foundation 9.1, a software platform that helps businesses build and manage private cloud infrastructure for AI applications.

There is already a real-world enterprise example. London Stock Exchange Group (LSEG) recently renewed its partnership with Broadcom under a new five-year agreement centered on VMware Cloud Foundation as part of its multicloud strategy. Broadcom will help deploy VMware Cloud Foundation 9 across parts of LSEG's infrastructure. That suggests large organizations with strict security, resilience, and compliance requirements continue to invest in infrastructure they can control more directly.

That gives Broadcom exposure to another AI growth opportunity beyond selling custom chips to hyperscalers.

Is Broadcom a buy?

Management expects Broadcom's revenue to be approximately $22 billion in the second quarter of fiscal 2026. The company is projected to earn $10.7 billion in AI semiconductor revenue in the second quarter, up from $8.4 billion in the first quarter.

Broadcom currently trades at 80.5 times trailing-12-month earnings, reflecting significant AI optimism. However, this premium valuation also leaves less room for execution missteps if growth slows.

Broadcom's AI revenue is also concentrated among just six major AI customers. If even one major customer cuts spending or changes its AI strategy, Broadcom's growth could slow down.

Despite these risks, Broadcom's biggest advantage may be that it is benefiting from multiple AI infrastructure trends at once, from custom silicon and networking to enterprise software. If that diversification continues to deepen, the company could remain a powerful long-term AI winner even without directly challenging Nvidia's dominance in GPUs.

Manali Pradhan, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Broadcom, Evercore, Meta Platforms, and Nvidia. The Motley Fool recommends London Stock Exchange Group Plc. The Motley Fool has a disclosure policy.