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Which AI Stock Won This Week: NVIDIA or Broadcom?

Eric Bleeker

Published: May 18, 2024 8:16 am

NVIDIA (NASDAQ: NVDA) and Broadcom (NASDAQ: AVGO) both saw strong gains this week, driven by optimism from product announcements by OpenAI and Google. While NVIDIA remains dominant in AI training, Broadcom has an edge in AI inferencing, partnering with Google on their TPUs, including the newly announced Trillium model. Let’s look at the major announcements from this week and why they were positive news for the largest AI semiconductor stocks. 

How Product Announcements This Week Impact NVIDIA and Broadcom

AI news this week was dominated by product announcements from both Google and OpenAI. While OpenAI announced a new model, Google revealed AI features across nearly all of its major products at the company’s I/O Event.

Following these major announcements, both NVIDIA and Broadcom saw their share prices jump, but which stock was the biggest winner? NVIDIA has a dominant market share in AI training workloads. A key reason for that is that training is well-suited to the more generalist nature of GPUs.

However, homegrown AI models like what Google has created for many of its products are workloads where NVIDIA doesn’t have as strong of an advantage. That is to say, when you’re using a Google product that has AI features, you’re “running” a model rather than training one. This is known as inferencing, and inferencing can use accelerators that are more specialized for specific tasks.

In the video above, 24/7 Wall Street Analyst Eric Bleeker details why the announcements this week are more favorable for Broadcom. The Trillium chip that Google announced this week claims up to a 4.7X performance improvement over prior generations. With Broadcom now on a reported 7th generation of building custom accelerators for Google, if the company continues using Broadcom’s chips to run its AI models, it’s likely that Broadcom will be one of the biggest beneficiaries of increasing AI usage.

While Broadcom and NVIDIA are both strong companies with advantages in AI, it’s likely that a world where the usage of AI in consumer products from companies like Google and Meta will lead to more near-term upside for Broadcom. That being said, consumer adoption of AI features will create long-term tailwinds for both companies.

Transcript:

Okay, Eric, we just talked about AI performance in stocks this week and some of the incredible runs that some of the suppliers to the industry have gone on recently.

Which AI stock won this week, Nvidia versus Broadcom?

This feels like every week these two companies sort of trade punches for AI stock of most interest in retailers’ minds. What happened this week?

Yeah, and I think both companies were winners.

NVIDIA’s stock is up 5% or 6% this week, Broadcom up 9%.

Both stocks are seeing optimism from product announcements from OpenAI and Google.

Now, of the two, I would say the bigger winner just on this week’s news is Broadcom.

And the reason for that is NVIDIA is the undisputed kingpin when it comes to training AI.

That’s where all the revenues come from in the past in terms of…

Companies, large hyperscalers, they’re buying a lot of NVIDIA GPUs to train new models.

You know, training a new model is now costing hundreds of millions and it’s forecasted to eventually go into the billions of dollars.

But when you actually use AI in consumer products, it’s going to increasingly use more inferencing.

And with inferencing, you don’t need as generalized of GPUs like NVIDIA sells. In fact, you can build them relatively specialized.

And that’s really Broadcom’s specialty because it is partnered with Google to build the previous generations of their TPUs, which are used for inferencing.

And this week, Google announced their newest model is called Trillium.

They’re promising a 4.7X improvement. That’s probably a little bit cherry picked, but where this Trillium is gonna be used is inferencing with a lot of Google’s homegrown models, which are used in these product announcements.

So I look at the advancements this week and where AI is going.

And I think it’s really plotting a great path for Broadcom.

If you’re an investor out there who wants to be invested in the growth of AI and you’ve got NVIDIA, but not Broadcom, my recommendation is to own both of them because I think there’s a good chance they’re both going to be winners in the years ahead.