Goldman Sachs Identifies Cadence and Broadcom as Chip Stocks to Watch Beyond Nvidia

Goldman Sachs highlights Cadence Design Systems and Broadcom as chip stocks with real upside beyond Nvidia, citing their strong performance in AI-powered design tools and data-center switches. Cadence reported a 23% revenue increase to $1.24 billion in Q1, while Broadcom posted a 20% revenue increase to $15 billion in fiscal Q2, with AI accounting for $4.4 billion of that. Goldman Sachs believes Broadcom's scale will push AI revenue past 40% by 2026.

Goldman Sachs has identified Cadence Design Systems (CDNS) and Broadcom (AVGO) as promising chip stocks with significant upside potential, especially in the AI infrastructure market. The investment bank's analysts have highlighted these companies' strong performance in AI-powered design tools and data-center switches, offering compelling growth prospects beyond NVIDIA (NVDA).

Cadence Design Systems reported a 23% revenue increase to $1.24 billion in Q1 2025, driven by robust demand for its AI-powered design tools. The company's $6.4 billion backlog indicates strong customer interest in its AI and IP platforms, positioning it as a high-quality compounding business [3].

Broadcom, on the other hand, posted a 20% revenue increase to $15 billion in fiscal Q2 2025, with AI accounting for $4.4 billion of that. The company's scale in data-center switches and custom ASICs is expected to push AI revenue past 40% by 2026, justifying its premium multiple [3].

Goldman Sachs believes that both Cadence and Broadcom have the potential to benefit from the AI frenzy, offering investors a chance to capitalize on the growing demand for AI infrastructure. The investment bank's positive outlook on these companies is supported by their strong financial performance and strategic positioning in the AI market.

Investors should closely monitor these companies' progress and consider the potential risks associated with their exposure to the AI infrastructure market. While the AI sector is expected to grow rapidly, it is not without its challenges, including supply chain disruptions and competitive pressures.

References:
[1] https://finance.yahoo.com/news/cadence-design-systems-nasdaqgs-cdns-171916437.html
[2] https://www.ainvest.com/news/broadcom-tomahawk-ultra-chip-strategic-move-challenge-nvidia-ai-infrastructure-race-2507/
[3] https://uk.finance.yahoo.com/news/goldman-highlights-two-chip-stocks-141805776.html