AI Stocks to Watch: Broadcom and NVIDIA Lead the Way in September

Broadcom (AVGO) and NVIDIA (NVDA) are top AI stocks for September due to their high net income ratios and strong profitability. Broadcom's custom accelerators are in demand, and it has a 12-month net profit margin of 31.6%. NVIDIA's bottom line improved in the fiscal second quarter, driven by strong demand for its graphics processing units. Both companies have a Zacks Rank of #3 (Hold).

Title: Broadcom and NVIDIA: Top AI Stocks for September

Broadcom (AVGO) and NVIDIA (NVDA) are emerging as top AI stocks for September, driven by their strong profitability and high net income ratios. Both companies have shown impressive performance in the AI sector, with Broadcom's custom accelerators and NVIDIA's graphics processing units (GPUs) in high demand.

Broadcom's AI Leadership

Broadcom has been recognized as the second-largest AI application-specific integrated circuits (ASIC) provider, trailing only NVIDIA [1]. The company's fiscal Q3 and Q4 sales guidance exceeded expectations by 1% and 2%, respectively, with AI ASIC and networking leading the growth [1]. Broadcom's AI revenue is expected to jump from 64% in fiscal 2025 to 88% in fiscal 2026, significantly above consensus estimates [1]. The company's total backlog of $110 billion, with more than half in the semiconductor segment, highlights its strong position in AI products [1].

Broadcom's strategic partnership with OpenAI, involving the co-development of AI chips and networking switches, is a significant catalyst for its AI ambitions [2]. The collaboration is expected to secure a multi-year revenue stream and position Broadcom as a key player in AI infrastructure [2].

NVIDIA's Profitability and Demand

NVIDIA's fiscal second quarter results showed a significant improvement in its bottom line, driven by strong demand for its GPUs. The company's data center division reported revenue of $21.9 billion from just three unnamed customers, highlighting its dominant position in the AI market [3]. While NVIDIA's concentration of revenue to a few large clients poses some risks, the company's strong market position and investor confidence in AI technology mitigate these concerns.

Investment Outlook

Both Broadcom and NVIDIA have a Zacks Rank of #3 (Hold), indicating a neutral outlook from analysts. However, their strong fundamentals and strategic positioning in the AI sector suggest potential long-term upside. Broadcom's robust R&D investments and strategic partnerships, along with NVIDIA's dominance in AI training, position both companies as compelling investments for those seeking exposure to the AI revolution.

Conclusion

Broadcom and NVIDIA's leadership in the AI sector, driven by strong profitability and high net income ratios, makes them top AI stocks for September. Their strategic positions and robust growth prospects suggest potential long-term value for investors.

References

[1] https://finance.yahoo.com/news/broadcom-second-only-nvidia-ai-151640382.html

[2] https://www.ainvest.com/news/broadcom-strategic-ai-push-avgo-15-surge-era-semiconductor-demand-2509/

[3] https://www.tomshardware.com/tech-industry/more-than-50-percent-of-nvidias-data-center-revenue-comes-from-three-customers-usd21-9-billion-in-sales-recorded-from-the-unnamed-companies