Top Semiconductor Stock Outpacing Nvidia With a 36% Gain Over 6 Months
Key Points
Broadcom's positioning in the ASIC chip industry has helped it outperform Nvidia over the past six months.
AI semiconductor revenue more than doubled year over year, and it's projected to more than triple year over year.
Broadcom's AI semiconductor segment is growing faster than Nvidia's data center revenue, which makes future outperformance more likely.
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Nvidia (NASDAQ: NVDA) is one of the most well-known stocks due to its AI chips. It has become the world's most valuable publicly traded company, but that doesn't make it the best stock to hold.
Fellow semiconductor stock Broadcom (NASDAQ: AVGO) has outperformed Nvidia with a 36% return over the past six months. The shift to custom-made chips may explain why Broadcom is doing so well and leaving Nvidia shares behind.
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ASIC chips are poised to gain market share
Broadcom produces ASIC chips while Nvidia specializes in GPUs. Nvidia's AI chips can handle a wide range of general tasks, but Broadcom's chips are specialized for specific tasks.
Many tech giants have Broadcom create custom chips for them. Alphabet's TPU chips and Meta Platforms' MTIA chips are designed by Broadcom, and the AI chipmaker also counts Microsoft and Amazon as top customers.
ASIC chips are becoming increasingly important due to AI inference. Their energy efficiency and low latency give them an edge for this type of AI.
Granted, data centers will still need GPUs and ASICs. ASICs like the ones Broadcom provides can do any one thing better than a GPU, but a GPU can accomplish a wide range of tasks.
Broadcom's earnings demonstrate why it is the leading ASIC producer
Broadcom and Nvidia compare in the broader AI chip market, but Broadcom is in a class of its own when it comes to ASICs. The company recently delivered 48% year-over-year revenue growth in its fiscal 2026 second quarter, with net income almost doubling year over year.
Artificial intelligence is driving most of the momentum, which sets the stage for accelerated revenue growth in future quarters. Broadcom's AI semiconductor segment grew by 143% year over year and makes up almost half of total revenue.
That's a faster growth rate than Nvidia's data center revenue, which was up by 92% year over year in its fiscal 2027 first quarter. Even though Nvidia has higher overall revenue growth rates, Broadcom is gaining market share at a faster rate in the critical AI chip industry.
Broadcom CEO Hock Tan even told investors to expect AI semiconductor revenue to surge by more than 200% in its fiscal 2026 third quarter.
It's expecting $16 billion in AI semiconductor revenue and $29 billion in overall revenue in that quarter. That would put the company at 84% year-over-year revenue growth. The forecast represents a meaningful improvement and high sequential growth while making AI semiconductor revenue more central to future results. These factors suggest Broadcom can continue to outperform Nvidia.
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Marc Guberti has positions in Broadcom. The Motley Fool has positions in and recommends Alphabet, Amazon, Broadcom, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
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