Nvidia’s volatility continues to have rippling effects throughout the technology sector and the broader market. In August, Nvidia stock was as low as $90.69 a share and as high as $131.26 a share — representing a sizable range for such a short period of time.
Nvidia reported earnings on Aug. 28, delivering parabolic growth and higher-than-expected guidance. And yet, the stock sold off. Nvidia stands out as a solid buy in the chip space for investors that can endure volatility.
However, another stock worth considering now is infrastructure software and solutions company Broadcom (NASDAQ: AVGO). Here’s why Broadcom is a unique opportunity in the semiconductor industry and could appeal to growth, income, and value investors alike.
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AI investment opportunities
There are several different ways to invest in artificial intelligence (AI).
It wasn’t long ago that Nvidia’s largest segment was graphics. But now, compute and networking (led by data centers) make up the vast majority of revenue and operating income. Nvidia makes graphics processing units (GPUs) that underpin its various AI computing platforms that can process high amounts of complex data and workloads.
There are also companies like Meta Platforms, which is a major Nvidia customer. Meta leverages AI throughout its business to help customers improve the quality of their content creation, make content faster, optimize its search algorithm to keep users engaged, and more. Likewise, Microsoft’s AI solutions, like Copilot for Microsoft 365, GitHub Copilot, and Azure AI for cloud infrastructure, are software upgrades that improve efficiency and save time.
Broadcom has a significantly different approach to AI than these companies. It makes a variety of hardware and software solutions that serve customers in cloud infrastructure, data centers, networking, broadband, wireless, storage, industrial applications, enterprise software, and more. Its products are instrumental in global connectivity.
The company has a diversified and proven business with tons of upside potential from AI. Broadcom’s application-specific integrated circuits (ASICs) are high-performance custom silicon chips. ASICs don’t have the range of functionality of GPUs, but they are highly effective solutions for specific tasks. Broadcom has been making ASIC solutions for more than three decades.
Today, it makes custom silicon for clients who need to handle complex AI workloads. Broadcom leverages its intellectual property portfolio to create these custom ASIC AI accelerators. In this vein, they are more an extension of the company’s core competencies rather than entirely new products.