Nvidia or Broadcom in October: 1 AI Chip Stock Gets My Money
Both NVIDIA and Broadcom are cashing in on the same AI data center boom, but they sell completely different things into it, and that gap changes everything about which one belongs in your portfolio right now.
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NVIDIA (NASDAQ:NVDA | NVDA Price Prediction) or Broadcom (NASDAQ:AVGO): which AI chip stock fits a retirement-focused portfolio better? Both companies profit from the same data center buildout. They sell very different things into it, and that difference decides this comparison. I compared them on three points: business model, growth and profitability, and valuation against what the market already expects.
What Each Company Actually Sells Into the AI Buildout
NVIDIA sells merchant accelerators. That means GPUs, CPUs and networking, packaged as complete systems for any buyer that can pay. Data Center revenue reached $89.02B (+117% YoY) last quarter. In management’s words: “Today, we’re not just selling the best chips. We’re selling a full-stack AI factory platform.”
Broadcom co-designs custom chips (XPUs) for a small group of buyers. It builds TPUs for Google and Jalapeno for OpenAI, and it expects Anthropic to become its largest XPU customer in 2027. It adds Tomahawk Ethernet networking on top, plus VMware infrastructure software. That software segment brought in $8.75B (+29% YoY) at an operating margin of about 84%.
Winner: Broadcom. For a retiree, recurring software cash flow under a cyclical chip business is a real buffer. Broadcom’s beta is 1.457, compared with 2.217 for NVIDIA. The main risk is concentration. If one frontier lab slows its spending, Broadcom experiences it right away.
Growth and Profitability Belong to NVIDIA
NVIDIA posted revenue of $96.22B (+105.8% YoY), beating the $92.07B consensus. Its operating margin was 60.38%, its net margin 55.60% and its return on invested capital (ROIC) 92.21%. The balance sheet is very strong, with debt/equity of 0.073 and interest coverage of 503x. Management expects revenue to grow about 70% in fiscal 2028, and it calls that outlook supply-constrained.
Broadcom is growing quickly too. Revenue reached $29.59B (+85.5% YoY), AI semiconductor sales hit $16.70B (+221% YoY), and free cash flow came to $13.66B, or 46% of revenue. It also carries significant indebtedness left over from the VMware deal.
Winner: NVIDIA. It is larger, more profitable and nearly debt-free. Over five years the stock returned 1032.85%, compared with 696.07% for Broadcom.
Valuation Against Expectations Tilts to Broadcom
NVIDIA trades at 30x trailing and 25x forward earnings. Broadcom trades at 44x trailing but 19x forward. The gap reflects how fast Broadcom’s earnings are expected to rise. Consensus EPS for its fiscal year ending October 2027 is $19.3938, compared with $11.6576 for fiscal 2026. Management says it is targeting AI semiconductor revenue of about $115 billion in fiscal 2027 and $230 billion in fiscal 2028, and EPS above $30 in fiscal 2028.
The market has paid up for NVIDIA’s run. Shares are up 25.74% year to date, while Broadcom is up only 3.17%. The bear case for Broadcom shows up in the revisions. Its fiscal 2027 estimate saw 25 downward and 11 upward revisions over 30 days. NVIDIA’s next-year estimate saw 42 up and zero down. If data center sites aren’t ready on time and Broadcom’s custom ramps slip, its low multiple will stay low.
Winner: Broadcom. You pay a lower forward multiple for a clearly mapped multiyear ramp.
My Verdict: Broadcom Wins the Retirement Portfolio
Broadcom holds the advantage for long-term income investors. It has raised its dividend for 15 consecutive years since fiscal 2011 and now pays $0.65 quarterly. Add the software base, lower volatility and the cheaper forward multiple, and it fits an income-and-compounding plan. NVIDIA’s dividend yield is essentially negligible. It returns cash mainly through buybacks, about $26.0B last quarter.
NVIDIA fits a different investor: a younger saver with decades ahead who wants the best growth engine in AI and can live with a beta above 2. Coming up next, Broadcom’s guidance calls for roughly $34.8B in fourth-quarter revenue, including $21.7B from AI semiconductors. Hitting those numbers would back up the conclusion.
Contact [email protected] for any questions or corrections.
Joel South covers large-cap stocks, dividend investing, and major market trends, with a focus on earnings analysis, valuation, and turning complex data into actionable insights for investors.
He brings more than 15 years of experience as an investor and financial journalist, including 12 years at The Motley Fool, where he served as an investment analyst, Bureau Chief, and later led the Fool.com investing news desk. He has also co-hosted an investing podcast and appeared across TV and radio discussing market trends.
