1 Thing Broadcom Does Better Than Nvidia
Written by Lyle Daly for The Motley Fool -> Broadcom's chips are custom-built for each of its data center customers. Switching costs are higher for these custom chips than for Nvidia GPUs. Since 2022, Nvidia (NASDAQ: NVDA) has dominated the artificial intelligence accelerator
Broadcom's chips are custom-built for each of its data center customers.
Switching costs are higher for these custom chips than for Nvidia GPUs.
Since 2022, Nvidia (NASDAQ: NVDA) has dominated the artificial intelligence accelerator market, and estimates still place its current market share at about 80%. However, other chipmakers are chipping away at its lead. Broadcom (NASDAQ: AVGO) , which recently surpassed a market cap of $2 trillion, is now its biggest competitor.
Although Nvidia still offers the most popular general-purpose graphics processing units (GPUs), Broadcom's focus on custom silicon allows it to do one key thing better than its rival.
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Nvidia may lead the AI chip market as a whole, but Broadcom is the leader in application-specific integrated circuits (ASICs), with about 70% market share. Broadcom serves as a design partner with hyperscalers and other AI companies that want chips custom-built to their specifications to handle highly specific types of workloads. It has deals with Alphabet , Meta Platforms , OpenAI, and Anthropic.
The development of such custom silicon is a lengthy process, requiring years of joint engineering between the AI company and Broadcom. The resulting chips are designed to fit the buyer's architecture and workload needs. Because the process is so involved, switching costs are high. If a Broadcom partner decided to switch to a different chip designer, it would need to redesign its chip.
Nvidia, on the other hand, sells standardized and versatile processors, including its current Blackwell architecture and the Vera Rubin platform, which combines both a GPU and a CPU, and is expected to ship later this year. Companies that buy Nvidia hardware aren't quite as locked into its ecosystem, though they do tend to build a lot of their software on its proprietary CUDA platform. Still, they could later switch to chips from Advanced Micro Devices , Intel , or a custom chipmaker, much more easily than Broadcom customers could move away from its custom chips.
