The AI Boom Is Entering A New Phase -- And Nvidia May Not Be The Biggest Winner

Nvidia (NASDAQ: NVDA), the world's largest shaper of information halfway GPUs, has been 1 of the biggest beneficiaries of the AI boom. The world's apical AI companies usage its GPUs to bid their ample connection models (LLMs), and it locks successful its customers with its proprietary software.

From fiscal 2022 to fiscal 2026 (which ended this January), Nvidia's gross and EPS grew astatine CAGRs of 68% and 89%, respectively. That's wherefore its banal surged much than 1,000% implicit the past 5 years. It's inactive a large semipermanent AI play, but different tech elephantine mightiness make adjacent much awesome gains implicit the adjacent fewer years arsenic the AI marketplace enters a caller phase.

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What caller signifier is the AI marketplace entering?

Over the past fewer years, galore AI companies person focused connected grooming their algorithms by feeding them monolithic amounts of data. These grooming sessions, which tin tally for weeks to months, usage ample clusters of Nvidia's GPUs successful information centers.

But today, inference -- oregon the enactment of utilizing bundle to entree that trained information -- is becoming the adjacent large maturation signifier of the AI market. As hyperscalers effort to trim the precocious costs of moving their AI models astir the clock, they're shifting distant from Nvidia's general-purpose GPUs toward specialized application-specific integrated circuits (ASICs).

Instead of being jacks-of-all-trades, ASICs are customized for circumstantial tasks. At scale, these specialized chips tin beryllium much cost-efficient than Nvidia's GPUs for handling inference tasks. Therefore, Broadcom (NASDAQ: AVGO) -- which controls astir 70% of the ASIC marketplace -- volition apt acquisition a large maturation spurt arsenic much AI companies ramp up their investments successful inference-driven technologies.

Why could Broadcom beryllium an adjacent bigger victor than Nvidia?

Broadcom already produces customized ASICs for Alphabet's Google, Meta Platforms, OpenAI, and Anthropic. In fiscal 2025 (which ended past November), its AI spot income soared 65% to $20 billion, accounting for 31% of its apical line. It expects that fig to emergence to $100 cardinal successful fiscal 2027.

From fiscal 2025 to fiscal 2027, analysts expect Broadcom's gross and adjusted net earlier interest, taxes, depreciation, and amortization (EBITDA) to some turn astatine CAGRs of astir 53%. Its soaring AI spot income should offset slower income of non-AI chips (including wireless, mobile, information center, storage, and concern markets) and infrastructure bundle (which it accrued its vulnerability to implicit the past decennary via respective large acquisitions).