Here's Why Nvidia and Broadcom Are Still Leading the Pack for AI Investing – The Motley Fool

The chip designers are crushing it right now.
There are countless ways to invest in artificial intelligence. While some may prefer to put money into software companies or electrical infrastructure suppliers, the way I keep circling back to is through the chip designers, notably Nvidia (NVDA 1.41%) and Broadcom (AVGO 0.65%). Both of these are seen as premier AI investments, and they can be summed up with one word: profits.
These two companies are making a ton of money right now from AI, and their earnings are only expected to rise. Some software companies are still fighting for market dominance, and how those businesses will fare over the long term is still unknown. Similarly, construction and infrastructure plays may only see a one-time flash-in-the-pan boost from the current phase of the AI cycle.
Broadcom and Nvidia, however, are positioned to be long-term benefactors of this trend, and despite their impressive performances to date, their stocks remain great buys now.
Image source: Getty Images.
Since the start of the AI build-out, Nvidia's graphics processing units (GPUs) have been in short supply. Demand is still far greater than its foundry partners can accommodate, but Nvidia is rising to the challenge and continues to deliver more and more computing units in greater quantities.
This is leading to impressive results. In its latest quarter, revenue grew 73% to $68.1 billion. Next quarter, Wall Street analysts expect 79% growth, followed by 85% in the quarter after that. Nvidia continues to see greater demand, but it still can't meet it all. So some of its biggest customers are also using chips designed by Broadcom.

NVDA Revenue (TTM) data by YCharts
Broadcom is approaching the AI computing problem with a different tool than Nvidia. Broadcom partners with each end user and designs an application-specific integrated circuit (AISC) that is narrowly suited to the specific workloads it will face. This is different from Nvidia, which designs its architectures to handle a wide array of tasks, leaving it to the clients to program the chips and adapt them to their needs.
There are advantages and drawbacks for each approach, but sales of Broadcom's custom AI chips are growing tremendously. In its fiscal 2026 Q1, its AI semiconductor division experienced 106% year-over-year growth to $8.4 billion. Custom AI chips are just one component of that division, so custom AI chips from Broadcom still occupy a much smaller segment of the market than Nvidia's GPUs.
However, Broadcom CEO Hock Tan expects explosive growth over the next few years. In 2027, he believes the company's custom AI chip business will generate $100 billion or more in revenue. That would be monstrous growth in a short time frame. But that growth isn't expected to wrap up in 2027, either.
Nvidia has said it expects global data center capital expenditures to continue rising through 2030, when it expects $3 trillion to $4 trillion to be spent. That's downright incredible, and Nvidia and Broadcom are likely to be at the center of that spending. This will allow the gravy train to continue flowing through these two businesses, and their profits should explode over the next few years.
Furthermore, these high-end computing units burn out after a handful of years of use, so there will also be a recurring-revenue portion of the AI business that will keep Broadcom and Nvidia in great spots for years to come. I don't think investors need to overcomplicate the AI investment game — buy shares of Broadcom and Nvidia, and forget about them. While these stocks will experience some ups and downs, the dips have proven to be short-term noise in a much greater upward trend that isn't likely to slow down over the next few years.
Broadcom and Nvidia are among my top AI stocks to invest in, and I believe that they can deliver market-crushing growth from here.
Keithen Drury has positions in Broadcom and Nvidia. The Motley Fool has positions in and recommends Broadcom and Nvidia. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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