With Nvidia (NASDAQ: NVDA) leading the AI stock surge, many investors now feel they might have missed the boat. Nvidia’s 187% year-to-date gain has set a high bar, raising questions about how much further it can climb without a significant pullback.
In response, Finbold analyzed two alternative AI stocks, Broadcom (NASDAQ: AVGO) and Advanced Micro Devices (NASDAQ: AMD), both of which present attractive valuations, robust fundamentals, and substantial growth potential within the AI sector.
Broadcom (NASDAQ: AVGO)
Broadcom, a leader in the semiconductor space, has gained over 57% year to date and is emerging as a powerful competitor in the AI space.
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The company’s focus on custom processing solutions, known as XPUs, is positioned to meet the needs of hyperscale data centers, and it expects a substantial $12 billion in sales from AI parts and custom chips in 2024.
With Bank of America estimating Broadcom’s AI market opportunity between $100 and $125 billion, as Yahoo Finance reported, Broadcom is also set for significant growth through its recent $69 billion acquisition of VMware, expanding its reach into multi-cloud solutions and subscription-based revenue.
Broadcom is also seeing robust demand for its networking chips, essential for connecting high-performance AI processors, and projects networking expenditures to rise from 20% to 25% of overall AI budgets.
The company’s innovative co-packaged optics technology enhances its appeal for future networking demands.
Broadcom also powers tech giants like Apple (NASDAQ: AAPL), Alphabet Inc. (NASDAQ: GOOGL), and Amazon (NASDAQ: AMZN), delivering broadband, networking, and wireless solutions. Broadcom’s networking chips are already the backbone of AI infrastructure, and the company’s influence is only set to grow.
Analysts are optimistic about Broadcom’s future, setting a price target of $199 over the next 12 months, implying an 11.26% upside.
With a forward P/E ratio of 29.23, Broadcom trades at a discount relative to Nvidia’s higher valuation, as data retrieved by Finbold from Stock Analysis shows. Additionally, Broadcom’s PEG ratio of 1.48 indicates balanced growth potential with moderate valuation, making it attractive to investors looking for value and growth in the AI space.
Advanced Micro Devices (NASDAQ: AMD)
Advanced Micro Devices (AMD) is quickly establishing itself as a formidable AI and data center player, with its stock up 8% over the year.
AMD’s new Instinct MI325X chip, set to launch in late 2024, targets a larger share of the data center and AI chip markets, directly competing with Nvidia’s Blackwell chip.
Reportedly sold out for the next 12 months, AMD’s upcoming MI325X accelerator could help meet the demand for high-performance AI chips, presenting an immediate revenue opportunity.
Additionally, AMD’s acquisition of Silo AI enhances its AI capabilities, particularly in large language model training, offering comprehensive AI solutions across both hardware and software.
Valued at $248 billion, according to Stock Analysis, AMD trades at a forward P/E of 35, offering a more aggressive growth outlook than Broadcom while remaining attractively priced compared to Nvidia. Analysts project a 28.70% upside, setting a target price of $197.48.
As AI demand grows and customers seek diverse suppliers, AMD’s ability to deliver competitive products at a lower price point than Nvidia positions it as a compelling choice for long-term AI investment.
In conclusion, both Broadcom and AMD are uniquely positioned to capture the next wave of AI-driven growth, offering investors exposure to the expanding AI and data center markets.
For those who missed the Nvidia rally, these two stocks provide attractive alternatives with strong growth potential and substantial upside in 2025.
