Custom AI Chips Are Coming for Nvidia's Crown. Here Are 2 Companies Quietly Cashing In.

Nvidia (NASDAQ: NVDA) still sits at the center of the artificial intelligence (AI) boom, supplying most of the chips that train and run today's largest AI models. But the biggest cloud companies are increasingly designing their own processors for some of that work, both to lean less on a single supplier and to tune the hardware to their own software.

The clearest example is Alphabet, whose Google unit has built custom chips called tensor processing units (TPUs) to run its AI services. And Google hasn't designed them entirely on its own.

That hints at a quieter way to play this shift: the chip designers helping the cloud giants build that custom silicon. Two of them are already capturing a fast-growing slice of AI spending.

Image source: Getty Images.

Nvidia's biggest competition

Broadcom (NASDAQ: AVGO) may be the best example of the staggering demand for custom AI chip solutions, and it may also be Nvidia's biggest competition. In Broadcom's fiscal second quarter of 2026 (the period ended May 3, 2026), revenue climbed 48% to a record $22.2 billion.

The driver was AI. Revenue tied to AI chips and networking jumped 143% to $10.8 billion, or close to half of total sales. A quarter earlier, that figure had been about $8.4 billion.

Much of this comes from custom accelerators that Broadcom co-designs for a handful of cloud customers, a group that now includes the likes of Google and OpenAI.

"Demand for XPUs and networking is simply insatiable," said CEO Hock Tan during the company's fiscal second-quarter earnings call.

Broadcom has booked more than $30 billion in AI orders in the quarter, and it guided for AI revenue to more than triple from a year earlier in the current quarter. In fact, the company has said its AI business could top $100 billion in annual revenue in fiscal 2027.

The smaller pure play

Marvell Technology (NASDAQ: MRVL) is a more concentrated bet on the same trend. The company reported its fiscal first quarter of 2027 (the period ended May 2, 2026) last month, with revenue up 28% to a record $2.4 billion.

Its data center segment did the heavy lifting, rising 27% to $1.83 billion, or about three-quarters of the total. For the full fiscal year that ended in January, revenue grew 42% to $8.2 billion, and management has guided for about 40% growth this year, to about $11.5 billion, with another step up toward $16.5 billion the year after.

"We are seeing exceptional AI-related bookings," said Chairman and CEO Matt Murphy in the company's fiscal first-quarter earnings release.

Marvell helps design custom chips for some of the largest cloud operators, with Amazon's cloud arm reportedly being its biggest such customer. It expects its custom silicon business to top $10 billion in annual revenue by fiscal 2029. In March, it also expanded a partnership with Nvidia to make its custom processors work more closely with Nvidia's systems -- a notable pairing, given that Marvell's chips often compete against Nvidia's.

How much is already priced in

Both stocks, however, have already soared.

Broadcom trades at a price-to-earnings ratio in the low 60s as of this writing, even after sliding from an early June high of $495. Marvell has more than tripled in 2026 and is set to join the S&P 500 before market open on June 22. And Marvel's price-to-earnings ratio? It sits near 100.

Of course, both companies face significant risks. Their custom-chip revenue, for instance, leans largely on a small number of cloud customers, creating customer concentration risk. And they don't necessarily have monopolies; Broadcom has said one large customer may use more than one supplier. Additionally, Broadcom's fast-growing AI sales notably carry lower margins than its software business.

So, where does that leave the two stocks?

I personally lean toward Broadcom. Its larger scale and broader mix of businesses may give it more room for error if AI spending cools, and its valuation is less demanding.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Broadcom, Marvell Technology, and Nvidia. The Motley Fool has a disclosure policy.