No chipmaker has benefited more from the rapid rise in artificial intelligence (AI) spending than Nvidia (NASDAQ: NVDA). The company’s graphics processing units (GPUs) are essential for any company looking to develop and train large language models and build generative AI applications.
Nvidia flew past the $1 trillion milestone in May 2023. It’s more than tripled since that point, becoming one of just three companies with a market capitalization above $3 trillion. But Nvidia isn’t the only company that’s seen its market capitalization soar as AI spending booms. In fact, AI advancements are virtually inseparable from the success of nearly every company valued at over a trillion dollars. The newest member, which both complements and competes with Nvidia, is no different.
The newest artificial intelligence chip stock in the $1 trillion club is Broadcom (NASDAQ: AVGO). The stock passed the milestone after a stellar fourth-quarter earnings report on Dec. 12. Here’s how the company became a leading AI chipmaker worth 13 figures.
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Broadcom is a well-diversified business. It has an enterprise software segment, led by VMWare and Symantec. It also makes semiconductors for applications, including wireless phones, WiFi, and Bluetooth. But what’s really driving the business are two specialized semiconductor applications: Its networking chips, and its AI accelerators.
Broadcom’s networking chips are essential infrastructure for AI data centers. While hyperscalers are paying billions for Nvidia’s GPUs, they need Broadcom’s chips to get the most out of their processing power. Broadcom’s Tomahawk and Jericho switches ensure that data moves quickly and efficiently from one server to another. That means there’s less redundancy and downtime in processing. And when you’re trying to make the most out of billions of dollars’ worth of chips, every second counts.
There’s no company that’s even close to Broadcom’s technology when it comes to developing these chips. Moreover, there’s nobody in charge of a hyperscale data center who’s going to risk…
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