Broadcom vs. Advanced Micro Devices: Wall Street Sees Much Faster Earnings Growth for One, But Thinks the Other Stock Will Outperform – The Motley Fool

nvidia As an undisputed winner of the AI ​​trade and a leader in creating chips and network infrastructure that powers AI solutions. However, there are many competitors trying to get involved in the action. After all, the potential market for AI is expected to be very large, so a small connection with the market can spike inventory.

Two stocks that coalesce with AI trading and create chips and other AI infrastructure Broadcom (avgo) -1.17%)) and Advanced Micro Devices (AMD) 1.15%)). Broadcom performed well, up nearly 86% last year. Meanwhile, AMD is struggling, with inventory dropping by almost 36%.

Wall Street analysts now expect one of these companies to grow revenue faster in 2025, while the other expects to outweigh the stock price rise over the next 12-18 months. Let's take a look.

Broadcom: 223% revenue growth

While Nvidia gave its name by dominating the Broad Chip Market, Broadcom focuses on creating custom chips for leading technicians such as: alphabet, Amazonand Microsoft.

After the emergence of Deepseek, a Chinese company that claims to have developed AI chatbots at a certain cost of competitors, many believe that custom chips are a good for Broadcom. He also suspects that Broadcom has locked in new customers like Openai, the creator of ChatGpt. The company is currently above its market capitalization of $1 trillion

For the fiscal year ended November, Broadcom reported only $1.27 in earnings per share, most of which was due to amortization of intangible assets related to the acquisition of VMware in late 2023. . On average, Wall Street analysts expect to increase their diluted profit to $4.01 in 2025, generating operating dilution revenues of $6.35, according to data provided by Visible Alpha.

In the company's final revenue call, management has expressed bullishness in the custom chip market, and believes the company will play a role as hyperscalers deploy their own custom AI accelerators or chips. Broadcom cites three Hyperscaler customers and together, their journey has led to the AI-serviceable addressable market (SAM) with custom chips and networks ranging from $60 billion to $90 billion in fiscal year 2027. He said it represents.

Broadcom's stock is working well and analysts believe it is well valued at this point. According to Tipranks, analysts have not said they would sell, but over the past three months, 27 people have issued research reports about the company. Average price target means very minimal upside. Having a breathing on the stock may be a more valuation call, as analysts seem to be completely bearish about the company. Broadcom is currently trading at 37x advance revenue.

Advanced Micro Devices: 147% Revenue Growth

Being involved in AI games is a big deal. That's why investors often discuss advanced microdevice. However, the main problem with AMD is that it has to compete with Nvidia, a company that generates gross profit margins in the mid-'70s percentile and demonstrates its extreme pricing capabilities. Experts say AMD produces cheaper chips than Nvidia, but only about 80% of them are powerful.

Still, according to Visible Alpha, Wall Street analysts now look forward to revenues growing steadily this year. On an operating basis, analysts expect revenue to increase from $3.31 to $4.62. However, we can see how long these will last after AMD's recent revenue has disappointed the market. The company won estimates prior to consensus and even provided revenue guidance.

However, the company's data center segment revenues were lighter than expected, and investors were disappointed given how much the market is growing. After the revenue, some analysts expressed concern about AMD's AI business's growth outlook.

Despite the weak number of data centers, analysts are still primarily bullish on inventory. According to Tipranks, a total of 36 analysts have published research reports on the company over the past three months. Of these, 24 analysts have bought the stock, with 11 people saying they will hold it, and only one person will sell it. The average price target suggests an increase of about 33% from the current level (as of February 11th).

The inconsistency between AMD and Broadcom appears to be based on ratings. Broadcom trades at 37x advance revenue, while AMD trades at about 23x. In recent years, AMD may have more room to run along with emotional changes. However, Broadcom appears to be better suited to capitalize on current trends in the AI ​​market.