Nvidia defends its dominance within the synthetic intelligence area with its software program moat. Many corporations have constructed their AI software program stacks primarily based on Nvidia CUDA to harness the facility of GPUs, and since Nvidia’s software program solely works with its GPUs, they cannot change to rivals’ GPUs.
This technique has labored nicely for the corporate; nonetheless, issues are altering, and Broadcom simply took a slice of Nvidia’s AI pie.
Broadcom’s improve in AI market share can solely shock individuals who do not know that it already has a long-standing partnership with Google, which birthed its tensor processing models (chips specialised for AI work).
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The corporate additionally works with Meta Platforms and ByteDance on their customized AI chips. Throughout the earnings name, Broadcom introduced a partnership with one other main AI firm.
On September 4, Broadcom (AVGO) reported its outcomes for Q3 of fiscal 2025.
Hock Tan, president and CEO of Broadcom, expects AI semiconductor income to develop to $6.2 billion within the subsequent quarter.
Income of $15.95 billion for the third quarter, up 22% YoY.
Internet earnings of $4.14 billion for the third quarter.
Adjusted EBITDA of $10.7 billion for the third quarter, or 67% of income.
Diluted earnings per share of $0.85 for the third quarter;
Quarterly frequent inventory dividend of $0.59 per share.
Income steerage of roughly $17.4 billion, a rise of 24% YoY.
Adjusted EBITDA steerage of 67% of projected income.
Throughout the earnings name, Tan stated that the corporate made a cope with a brand new buyer to construct their AI accelerators, and the client dedicated to over $10 billion in orders of AI racks primarily based on the corporate’s XPUs.
Broadcom did not reveal who the brand new buyer is, however Monetary Instances’ contacts confirmed that OpenAI is the brand new shopper.
With OpenAI becoming a member of Google, Meta, and ByteDance searching for cheaper AI chips, it’s clear that almost all corporations would change from Nvidia to one thing else if it weren’t for CUDA. Nonetheless, since they’re investing in these chips, they need to additionally slowly make modifications to their software program stacks.
Extra AI Shares:
One other piece of tech that helps Nvidia dominate the market is NVlink. It helps join a number of GPUs and talk at very excessive speeds. Many corporations have teamed as much as work on another known as Extremely Accelerator Hyperlink, together with Google, AMD, Intel, Meta, Apple, Hewlett Packard Enterprise, Microsoft, Broadcom, and lots of extra.
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Following the earnings report and OpenAI deal, Financial institution of America analyst Vivek Arya and his staff up to date their opinion on Broadcom shares.
Analysts estimated that, assuming Broadcom and Nvidia are the one two AI distributors, Broadcom’s calendar 12 months 2025 compute and networking AI market share is about 11%.
They stated that if we take Broadcom’s commentary at face worth, its AI gross sales might strategy $100 billion by calendar 12 months 2027, they usually estimate market share might greater than double to 24%.
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Buyer focus: Google accounts for 15-20% of total gross sales and certain greater than 30% of semiconductor gross sales estimates for FY2025.
Nvidia’s bettering networking stack is rising competitors within the networking market.
Vivek reiterated a purchase score and raised the goal worth from $300 to $400, primarily based on a 37 a number of of his estimate for the price-to-earnings ratio for the calendar 12 months 2026. That is within the higher vary of Broadcom’s historic vary of 10 to 38 and justified given double-digit earnings per share development, profitability, free money movement era, and returns.
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This story was initially reported by TheStreet on Sep 6, 2025, the place it first appeared within the Expertise Enterprise Information part. Add TheStreet as a Most popular Supply by clicking right here.
