Is Broadcom Stock Now a Better Buy Than Nvidia?

Broadcom (NASDAQ: AVGO) has had a solid 2026, but a rough couple of weeks recently. It's up more than 13% for the year, but it used to be up around 40% prior to its earnings announcement. Now, it's down around 20% from its all-time highs.

Prior to the sell-off, it was pretty clear that Nvidia (NASDAQ: NVDA) was a better buy than Broadcom, but now that there has been a significant price correction, is that still the case? Let's take a look and see which of these two artificial intelligence (AI) chip makers is the better buy now.

Image source: The Motley Fool.

Nvidia and Broadcom are competing in the same market

Nvidia is the industry standard in the AI investing realm. Its GPUs are commonly used in data centers to train and run AI models, and nearly every AI company has a large chunk of its computing power from Nvidia. With how rapidly Nvidia is growing, this isn't likely to change.

Furthermore, many companies have their workloads designed to run on Nvidia infrastructure, and changing to a different computing provider would be painful. But Broadcom is looking to change their minds.

GPUs are incredibly powerful and suited for a wide variety of workloads, but the reality is that some GPUs only see one type of workload occur throughout their lifespan. So, some of its capabilities are wasted, and could have been sold at a cheaper price point if those features weren't included. Additionally, the resulting computing unit could also be optimized to run just that workload. This idea is what drives Broadcom's custom AI chip business.

Broadcom partners with AI hyperscalers to design a custom AI chip that is tailored for their workload. In a wide-ranging test, it would fail and lose to a GPU. But these custom AI chips outperform GPUs at a lower price point when only that optimized workload type is tested.

There is a massive market for both of them, so a winner-take-all scenario isn't necessary or likely. But there is a big difference in the products that each is offering. So, which one is doing better now?

Nvidia's overall growth is faster

Nvidia is entirely focused on GPUs, and a vast majority of Nvidia's revenue comes from data center products, making it a highly focused business. In the company's fiscal 2027 first quarter (ended April 26), revenue rose 85% year over year, powered by massive AI demand. At face value, Broadcom's overall revenue grew at a 48% year-over-year pace, clearly and significantly behind Nvidia. But that's not the full picture.

Broadcom has several legacy divisions that aren't experiencing the same growth levels as its custom AI chips business. If you look at its AI semiconductor revenue, which makes up slightly less than Broadcom's overall total, it grew at a 143% pace and next quarter Broadcom projects 200% growth. By the end of 2027, the company expects this business to generate $100 billion or more in revenue. For reference, it generated $10.8 billion in Q2 (ended May 3).

So, Nvidia may be growing faster overall, but Broadcom's AI chip business is growing faster.

Nvidia looks far cheaper

Finally, let's look at valuation. I'll be using the forward price-to-earnings (P/E) ratio to value these two, because their massive growth rates should be accounted for when valuing the stocks. Despite its deep sell-off, Broadcom still trades at a massive premium to Nvidia.

AVGO PE Ratio (Forward) data by YCharts

While I get the excitement around Broadcom's stock regarding its custom AI chip business, it still has to execute to gain the market share, and it isn't leading to an overall business that's better than Nvidia's. Nvidia is the faster-growing and cheaper stock. It has deep partnerships within the industry and will be a top AI pick for years to come.

Despite Broadcom's sell-off, I still believe that Nvidia is the better investment, but I'm far from bearish on Broadcom, as it's another solid AI play.

Keithen Drury has positions in Broadcom and Nvidia. The Motley Fool has positions in and recommends Broadcom and Nvidia. The Motley Fool has a disclosure policy.