Nvidia Has 'A Lot Of Risk': Here Are 2 Alternative AI Plays

Nvidia (NVDA) has been a dominant player in the AI chip market, but recent concerns about its high valuation and potential regulatory risks have led some investors to seek alternative opportunities. While Nvidia's GPUs are widely used in AI training and inference, the company's reliance on a few large customers and the potential for technological obsolescence have raised eyebrows. In this article, we will explore two alternative AI chip stocks that offer compelling growth prospects and address some of Nvidia's risks.

1. Broadcom (AVGO)
Broadcom is a leading provider of custom AI chips, helping customers design their own application-specific integrated circuits (ASICs) for specific tasks. By focusing on ASICs, Broadcom addresses the risk of relying on a single chip provider like Nvidia. ASICs are tailored to specific tasks, offering better performance and power efficiency for those tasks. Broadcom's ASICs are used by major tech companies like Alphabet, Meta Platforms, ByteDance, OpenAI, and Apple, indicating a strong market demand and customer satisfaction.



Broadcom's top three customers could deploy up to 1 million AI chips in 2027, representing a $60 billion to $90 billion revenue opportunity. The company's ASICs lack the flexibility of GPUs, but they generally have better performance and more efficient power consumption for the specific task for which they were designed. Broadcom's strong customer base and large market opportunity make it an attractive alternative to Nvidia.



2. Advanced Micro Devices (AMD)
AMD is another alternative AI chip stock, offering GPUs for AI inference that are cheaper than Nvidia's GPUs. AMD's GPUs cater to narrow, well-defined use cases, making them well-suited for AI inference tasks. Additionally, AMD's CPUs designed for data centers provide the brains to complement the power offered by GPUs. AMD's GPUs and CPUs have gained market share in the AI inference and data center spaces, respectively, indicating strong demand and performance.



AMD's niche in AI inference and strong data center presence make it a compelling alternative to Nvidia. However, AMD's software platform has been criticized for holding back the performance of its GPUs compared to Nvidia's CUDA platform. Additionally, AMD's GPU market share is significantly smaller than Nvidia's, which could limit its ability to capture a larger share of the AI chip market.



In conclusion, Broadcom and AMD offer attractive alternatives to Nvidia in the AI chip market. Broadcom's focus on custom AI chips and AMD's GPUs for AI inference address some of Nvidia's risks, such as market concentration and technological obsolescence. Both companies have strong customer bases and market opportunities, making them compelling investment options for investors seeking exposure to the growing AI chip market. However, it is essential to consider each company's unique strengths and weaknesses when making investment decisions.