Is Broadcom (AVGO) the Most Undervalued AI Powerhouse Behind Nvidia?

The AI semiconductor race has intensified in 2025, with NVIDIA and Broadcom (AVGO) emerging as dominant players. While NVIDIA’s Blackwell chips and Hopper platform have driven a 114% year-over-year surge in data center revenue to $115.2 billion [1], Broadcom’s strategic focus on AI-specific ASICs and inference infrastructure has quietly positioned it as a high-conviction, undervalued contender. This article examines AVGO’s 46% YoY AI semiconductor revenue growth, its leadership in custom accelerators, and its expanding partnerships with tech giants like Google, Meta, and Apple, arguing that its 60% CAGR addressable market and valuation discount make it a safer long-term play than NVIDIA.

AVGO’s AI Semiconductor Growth and Strategic Positioning

Broadcom’s AI semiconductor revenue in Q2 2025 hit $4.4 billion, a 46% YoY increase, with projections of $5.1 billion in Q3 2025 (60% YoY) [3]. This growth is fueled by two pillars: AI networking solutions and custom accelerators. AI networking revenue alone surged 170% YoY in Q2 2025, now accounting for 40% of AVGO’s AI semiconductor segment [6]. Products like Tomahawk switches and Jericho routers are critical for large-scale AI cluster deployments, enabling efficient data center interconnects.

Beyond networking, Broadcom’s custom AI accelerators (XPUs) are gaining traction. Management forecasts clusters exceeding one million units by 2027 [6], targeting inference workloads—a $60–90 billion market opportunity by 2027 [1]. Unlike NVIDIA’s general-purpose GPUs, Broadcom’s XPUs are tailored for specific AI tasks, offering higher efficiency in inference and edge computing. This specialization aligns with growing demand for cost-effective AI deployment in cloud and enterprise environments.

Broadcom’s partnerships with industry leaders further solidify its position. While not explicitly named, its Ethernet-based solutions are integral to AI infrastructure upgrades at hyperscalers like Google, Meta, and Apple [6]. These collaborations underscore AVGO’s ability to capture market share in a sector where NVIDIA currently dominates.

Valuation Metrics and the $160B+ Revenue Gap

Despite AVGO’s robust growth, its valuation remains a compelling contrast to NVIDIA’s. As of August 2025, Broadcom trades at a P/E ratio of 108.14, compared to NVIDIA’s 49.62 [2]. This disparity reflects divergent investor sentiment: NVIDIA’s lower P/E is justified by its 114% YoY revenue growth in fiscal 2025 ($130.5 billion total revenue) [1], while AVGO’s higher P/E suggests skepticism about its ability to match NVIDIA’s dominance.

However, this skepticism may be misplaced. AVGO’s AI revenue is projected to grow from $12.2 billion in FY2024 to $15–18 billion in FY2025 [1], with a 60% CAGR in its AI addressable market [6]. By 2027, this could close the $160B+ revenue gap with NVIDIA. AVGO’s PEG ratio of 1.8 [5] appears elevated, but it reflects the market’s underestimation of its long-term potential. In contrast, NVIDIA’s PEG of 1.2 [5] implies it is already priced for perfection, leaving less room for upside.

The Case for AVGO as a Safer AI Play

Broadcom’s business model offers structural advantages over NVIDIA. Its diversified portfolio includes high-margin software and connectivity solutions, reducing reliance on AI semiconductors alone. AVGO’s total revenue in Q2 2025 reached $51.574 billion [4], with a market cap of $1.451 trillion [3], making it the eighth most valuable company globally. This scale provides stability, even as AI markets evolve.

NVIDIA, while a clear leader in training chips, faces risks from commoditization and competition in inference. Broadcom’s focus on niche, high-margin segments like custom ASICs and AI networking offers a more defensible moat. Additionally, AVGO’s expanding partnerships with hyperscalers position it to benefit from the $60–90 billion AI infrastructure market [1], a segment NVIDIA has yet to fully penetrate.

Conclusion

Broadcom’s 46% YoY AI semiconductor growth, leadership in custom accelerators, and expanding addressable market make it a compelling, undervalued play in the AI boom. While NVIDIA’s revenue and P/E ratio dominate headlines, AVGO’s higher P/E is justified by its long-term potential and structural advantages. For investors seeking a safer, high-conviction AI stock, AVGO’s 60% CAGR market and $1.451 trillion valuation discount position it as a strategic counterbalance to NVIDIA’s dominance.

Source:
[1] NVIDIA Announces Financial Results for Third Quarter Fiscal 2025 [https://nvidianews.nvidia.com/news/nvidia-announces-financial-results-for-third-quarter-fiscal-2025]
[2] AVGO - Broadcom PE ratio, current and historical analysis [https://fullratio.com/stocks/nasdaq-avgo/pe-ratio]
[3] Broadcom (AVGO) - Market capitalization [https://companiesmarketcap.com/broadcom/marketcap/]
[4] Broadcom (AVGO) - Revenue [https://companiesmarketcap.com/broadcom/revenue/]