In the rapidly evolving world of artificial intelligence (AI), projections indicate that Broadcom Company may become a formidable competitor to Nvidia in the AI chip market by 2025. Fund manager Stephen Yu, who oversees investments for the Blue Whale Growth Fund, has voiced expectations that Broadcom will not only generate substantial returns for investors but could also outperform Nvidia, currently a frontrunner in the sector.
The surge in interest towards AI chips is driven by tech giants including Microsoft Corporation, Amazon.com, Google LLC, and Meta Platforms Inc. These companies, while still making significant GPU purchases from Nvidia, are increasingly focused on developing custom chips tailored for their AI applications. This shift highlights a strategic move to diversify their supplier base and reduce dependency on a single source.
Yu has pointed out that while Nvidia's graphics processing units (GPUs) are renowned for their power, they also come with high price tags. "From Microsoft’s perspective, you don’t want to become overly dependent on one single supplier," he articulated. This sentiment underscores a broader trend where major technology companies are recognising the importance of establishing multiple supply channels for AI processing needs.
Broadcom’s financial performance has been noteworthy, with the company's revenue increasing by over 103% year-to-date. Following this growth, Crowned with a market capitalisation exceeding $1 trillion, Broadcom anticipates AI-related revenue to triple from $4 billion to $12.2 billion by 2024. The company is currently collaborating with prominent cloud computing clients, including Meta, Alphabet, and ByteDance, to create bespoke AI chips, reaffirming its strategic positioning in this burgeoning market.
While Yu still holds a stake in Nvidia, he has reduced his investment in the company to around 10% of his portfolio. He perceives Broadcom as a more appealing investment owing to its capacity for growth, given its relatively smaller size. "For a trillion-dollar company to grow 50% to become a $1.5 trillion business is reasonable. But for Nvidia to do that, it would need to add another $1.5 trillion, which is a very large number," Yu commented.
The growing trend of custom AI chip development could have significant implications for how AI technologies are applied across various industries. Major players like OpenAI and Apple are also taking steps to partner with Broadcom in developing proprietary AI server chips, thereby broadening their strategic approaches beyond Nvidia’s offerings.
According to Reuters, the emphasis on customisation and the establishment of partnerships among leading tech companies point to a shift in the AI landscape, which is poised to grow in complexity in the coming years. As businesses navigate the implications of this evolution, the competitive landscape between Broadcom and Nvidia is set to become increasingly critical.
Source: Noah Wire Services