Better Super Semiconductor Stock: Advanced Micro Devices (AMD) or Broadcom?

Key Points

• The artificial intelligence (AI) boom is driving incredible demand for specialized data center chips, which is benefiting Advanced Micro Devices (AMD) and Broadcom.

• Both AMD and Broadcom are producing accelerating revenue growth in their AI hardware businesses, and that momentum is expected to continue.

• Shares of AMD and Broadcom are soaring, but picking the better buy from here might come down to investor preference.

• 10 stocks we like better than Advanced Micro Devices ›

The semiconductor industry is the beating heart of the artificial intelligence (AI) boom, because developing this revolutionary technology wouldn’t be possible without specialized data center chips and networking components. Demand is heavily outstripping supply for this hardware, which is benefiting suppliers like Advanced Micro Devices (NASDAQ: AMD) and Broadcom (NASDAQ: AVGO).

Since the AI boom started gathering momentum at the start of 2023, shares of AMD and Broadcom have exploded higher by 590% and 650%, respectively. But which company is the better investment?

Will AI create the world’s first trillionaire? Our team just released a report on the one little-known company, called an “Indispensable Monopoly” providing the critical technology Nvidia and Intel both need. Continue »

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The case for AMD

AMD started making data center chips specifically for AI workloads in 2023 with the launch of its MI300X graphics processing unit (GPU). The chip attracted customers like Oracle and Microsoft, so it helped the company snatch some market share from Nvidia, the leader in this space.

AMD has since launched GPUs like the MI355X and the MI440X, which are even more powerful than the MI300X, but at the end of this year, it will start shipping a new generation of chips called the MI450 series. They aren’t traditional GPUs — instead, they are AI accelerators that can be customized to suit the needs of specific AI customers.

The MI450 accelerators can be configured in a data center rack called Helios, which includes specialized hardware and software to get the best performance out of each chip. In this configuration, AMD says the MI450 accelerators will perform an eye-popping 36 times better than its previous generation of GPUs, so Helios will be the company’s answer to Nvidia’s new Vera Rubin system, which will also ship later this year.

Meta Platforms and ChatGPT creator OpenAI recently signed multiyear deals to become two of AMD’s biggest customers. They will each deploy 6 gigawatts worth of computing capacity using AMD’s AI chips, starting with the MI450 series later this year.

During the first quarter of 2026, AMD’s data center business produced a record $5.8 billion in revenue, up 57% from the year-ago period. However, CEO Lisa Su says the company is fielding a number of inquiries from new customers who want MI450 accelerators, so she believes the data center segment could generate upward of 80% revenue growth in 2027 and beyond.

While that sounds like great news, investors are paying a hefty price for AMD stock right now — but more on that in a moment.

The case for Broadcom

Broadcom has decades of experience in the computing hardware space, so it was positioned to hit the ground running when the AI opportunity popped up. The company now supplies custom AI data center accelerators to at least five major customers, including Alphabet, Meta Platforms, and OpenAI.

Broadcom helped Alphabet design its Tensor Processing Units (TPUs), highly specialized data center chips for AI workloads. Alphabet’s newest 8t TPU, used for AI training, is 3 times more powerful than its previous generation. And its new 8i, used for AI inference, is also a big upgrade with up to 80% better performance per dollar.

Last year, leading AI start-up Anthropic placed $21 billion worth of orders for Alphabet’s TPUs, which will be delivered through Broadcom during 2026 and 2027. And then in April of this year, Anthropic announced an expansion of its partnership with Alphabet and Broadcom, which will involve significantly more spending on TPUs through at least 2027.

But Broadcom is also a leading supplier of data center networking equipment. Its latest Tomahawk 6 Ethernet switch regulates how fast data travels between chips and devices, and it offers an industry-leading capacity of 100 terabits per second. Next year, the company plans to launch Tomahawk 7, which it expects to deliver double the performance.

During Broadcom’s fiscal 2026 first quarter (ended Feb. 1), its AI products generated $8.4 billion in revenue, a whopping 106% increase from the year-ago period. Management’s guidance suggests that the growth rate has accelerated to 143% in the second quarter, for which the company will report results on June 3. Simply put, AI hardware is quickly becoming a substantial chunk of Broadcom’s business.

The verdict

Both AMD and Broadcom have forecast accelerating revenue growth in their AI-related businesses, which isn’t a surprise considering demand exceeds supply for AI chips and components. Therefore, it might make sense for investors to own a slice of both companies.

However, valuation is an important consideration when you’re comparing stocks, and there is a stark difference in this case. AMD stock is trading at a price-to-earnings (P/E) ratio of 97.5, whereas Broadcom stock has a much lower P/E ratio of 56.9.

For value investors, Broadcom looks like a much better deal right now. However, growth investors willing to adopt a long-term time horizon of three to five years might prefer AMD stock because of its smaller market capitalization. Let me explain.

AMD is worth $720 billion as I write this, whereas Broadcom’s market cap is over $1.9 trillion. Plus, AMD’s quarterly data center revenue is much smaller than Broadcom’s AI hardware revenue. Therefore, if AMD manages to increase its market share, it could have significantly more room to grow over the long run than Broadcom, which is likely why many investors are willing to pay such a high P/E ratio for its stock.

In summary, these are two extremely high-quality companies, so it’s hard to go wrong investing in either one.

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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Broadcom, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool has a disclosure policy.