Semiconductor Sell-Off: The 1 AI Chip Stock I'd Buy and 1 I'd Avoid

The semiconductor sell-off is a chance for investors to buy into the artificial intelligence (AI) boom at a discount, but not every chip stock is worth picking up. Broadcom (NASDAQ: AVGO) and Intel (NASDAQ: INTC) are two AI chip stocks worth looking into, but here's why investors might buy one and avoid the other.

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Why Broadcom is the AI chip stock investors could buy

One of Broadcom's biggest advantages is its ability to help major tech companies develop custom chips designed for specific workloads. For example, instead of relying on general-purpose graphics processing units (GPUs), hyperscalers are increasingly using these specialized chips to enhance performance and reduce power consumption.

Broadcom is already benefiting from this shift.

In its fiscal third quarter of 2026, its AI semiconductor revenue surged 221% year over year, driven by demand for custom accelerators and AI networking. And management expects that momentum to continue, projecting further revenue growth in the following quarter.

Plus, the company's opportunity extends beyond individual chips. AI data centers require high-speed networking to move massive amounts of data between chips, servers, and storage systems. And Broadcom's networking products help address this challenge, giving it more ways to benefit as hyperscalers expand AI capacity.

But it doesn't end there.

Broadcom's acquisition of VMware expanded its presence in enterprise software, giving investors exposure to both the AI infrastructure boom and the recurring demand for software that helps businesses manage their IT environments.

Of course, Broadcom isn't without risks. Its growth depends a lot on continued spending by a small group of large customers, and any slowdown in their investment could quickly affect revenue growth.

That said, Broadcom's forward price-to-earnings (P/E) ratio of about 18 looks attractive given its history of growing sales tied to the lucrative AI space. Looking ahead, if it continues to benefit from demand for custom AI chips and networking, investors could participate in that growth at a reasonable price.

But not every chip company is well-positioned to benefit from AI. The next company has its own opportunity, but the bull case hinges heavily on a turnaround in its business.

Why investors could be cautious about Intel's turnaround

Intel is an interesting chip company to watch. That said, investors might be more cautious about buying the stock today because its long-term potential depends on successfully executing its turnaround.

The company is investing heavily in advanced processing technology, including its Intel 18A process, while strengthening its manufacturing capabilities through Intel Foundry.

Still, improving its existing chip business is one challenge, but building a successful foundry operation that can compete with established manufacturing leaders is another. Manufacturing semiconductors requires substantial capital, solid execution, and customers willing to commit their chip designs to the platform.

Any delays, manufacturing yield problems, or weaker customer adoption could undermine Intel's turnaround.

Plus, competition is another concern. Intel faces established rivals as it tries to build its presence in a foundry market where customers already have solid alternatives.

Not only that, Intel's forward P/E of about 51 looks much harder to justify given the uncertainty surrounding its turnaround. The premium suggests investors are counting on strong earnings improvement, leaving less room for disappointment if its manufacturing ambitions fall short.

But if it can manufacture competitive chips and consistently win business from customers, its investments just might pay off.

Which of the two AI chip stocks comes out ahead?

Broadcom looks like the stronger AI chip choice

The semiconductor sell-off is creating opportunities for investors willing to look beyond short-term volatility.

Broadcom stands out as the better pick for investors seeking AI growth at a reasonable price, thanks to its established AI chip business, networking expertise, and attractive valuation. Intel has turnaround potential, but its execution challenges and premium valuation make this semiconductor veteran the higher-risk choice.

Rick Orford has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Broadcom and Intel. The Motley Fool has a disclosure policy.