Nvidia (NASDAQ:NVDA) remains the undisputed AI chip king, but Broadcom’s (NASDAQ:AVGO) latest earnings release shows that the rise of XPUs could start eating into GPUs’ dominance.
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According to Citi’s Atif Malik, who’s ranked 9th among thousands of Wall Street analysts, GPUs should still command over 85% of the AI compute market by 2026. However, the XPU segment – hyperscaler-designed AI chips like Google’s TPUs and Amazon’s Trainium – is projected to grow 53% year-over-year in 2026, outpacing GPUs’ 34% growth. That shift implies about $12 billion less in GPU sales, leading Malik to trim roughly 5% from his earlier $232 billion 2026 merchant GPU forecast.
Malik’s recalibration follows Broadcom’s FQ3 earnings, where the company highlighted accelerating XPU demand from both new and existing customers. As Malik noted, Google’s willingness to provide compute capacity to rivals such as Meta, OpenAI, and Oracle underscores how custom chips are becoming a credible alternative to Nvidia’s GPUs – a risk the analyst had recently flagged.
Reflecting this expected ~4% reduction in 2026 GPU sales, Malik lowered his NVDA price target from $210 to $200, though he still sees ~18% upside and maintains a Buy rating. (To watch Malik’s track record, click here)
Broadcom, meanwhile, is positioned differently in the AI race. Rather than competing directly with Nvidia, it supplies the critical infrastructure enabling hyperscalers to build their own XPUs. This unique role is paying off.
Malik’s Citi colleague Christopher Danely noted that Broadcom’s results showed “continued AI strength,” with revenue climbing 6% sequentially to $16.0 billion, beating consensus estimates. AI already accounts for a third of sales, and demand is broadening, including $10 billion in new custom chip orders that Danely suspects come from OpenAI.
That momentum prompted Danely to raise his FY25 revenue forecast while trimming EPS for higher stock-based compensation. For FY26, however, the analyst boosted both revenue and EPS projections sharply, thanks to stronger AI-driven growth.
Danely also raised his price target for Broadcom from $315 to $350, though the stock is already trading above that level. (To watch Danely’s track record, click here)
All in all, NVDA boasts a Strong Buy consensus rating based on 35 recent Buy ratings, 3 Holds, and a single Sell. The stock’s $210.67 average price target implies gains of 24% are in store for the coming year. (See NVDA stock forecast)
Broadcom also claims a Strong Buy consensus view, based on a mix of 25 Buys and 2 Holds. Going by the $375.30 average target, the shares will be changing hands for an 11% premium a year from now. (See AVGO stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.