Nvidia (NVDA) stock could have its entire week shaped by the earnings report coming from rival chipmaker Broadcom (AVGO) on Thursday. Nvidia, the dominant provider of AI chips, has already seen its shares fall 8.4% over the past month. This decline is largely fueled by concerns that custom chips designed by Broadcom, like Google’s (GOOGL) Tensor Processing Units (TPUs), could begin to eat into Nvidia’s massive market share.
TipRanks Cyber Monday Sale
- Claim 60% off TipRanks Premium for data-backed insights and research tools you need to invest with confidence.
- Subscribe to TipRanks' Smart Investor Picks and see our data in action through our high-performing model portfolio - now also 60% off
While Broadcom has been careful not to call itself a direct competitor, its CEO Hock Tan was more aggressive in September, claiming custom chips would progressively gain market share from Nvidia’s GPUs. Now, investors from both companies are watching closely to see what tone Tan strikes this time.
Nvidia Launches Counterattack Against Broadcom Chips
The fear is that custom chips, once limited to internal use by massive tech giants like Google, are becoming more widely available. Analysts at Susquehanna recently made a dramatic prediction. They see Nvidia’s AI chip market share falling to 67% by the end of the decade, which is a sharp drop from its current 80%-plus dominance. Their forecast names Broadcom as the main winner, predicting its share will rise to nearly 14%.
This makes Broadcom’s earnings crucial. If the CEO gives any clues that Google’s powerful TPUs will be sold more widely, it would be great news for Broadcom, but a major blow to Nvidia.
However, Nvidia is fighting back hard. Citi analyst Atif Malik believes Nvidia’s next generation of Rubin chips will feature a cheaper option to blunt the threat. He noted that the Rubin chips are estimated to cut the total cost of ownership by three times compared to current models. The analyst believes this move would “give XPUs like TPU/Trainium a run for their money next year”, and he reiterated a strong Buy rating on Nvidia shares with a $270 price target.
Key Takeaway
The final takeaway from this story is simply that Nvidia’s dominance faces its first real challenge, and Broadcom’s earnings report will show how serious the threat is.
Investors are selling Nvidia stock because they fear custom chips made by rivals like Broadcom for Google are starting to steal market share. The earnings report on Thursday will either confirm those fears or show that Nvidia’s upcoming Rubin chips, which are designed to be much cheaper, will win the chip war and keep the company in charge of the AI market for years to come.
Investors can compare Nvidia and Broadcom’s stocks side-by-side using the TipRanks Stocks Comparison Tool. Click on the image below to find out more.
