Semiconductor stocks Broadcom (AVGO 1.13%) and Marvell Technology (MRVL 2.56%) have delivered outstanding gains in 2024, with shares of both companies more than doubling as of this writing thanks to the rapidly growing demand for their application-specific integrated circuits (ASICs) and networking chips being deployed in data centers for tackling artificial intelligence (AI) workloads.
Broadcom stock is up 124% this year, while Marvell stock has logged gains of 93%. But if you had to choose one of these AI stocks for your portfolio right now following the gains that they have delivered in 2024, which one should you buy? Let’s find out.
The case for Broadcom
The demand for AI-specific ASICs is growing as cloud service providers are developing chips in-house to reduce reliance on expensive semiconductors from companies like Nvidia. Broadcom steps in by reportedly manufacturing custom chips for major names such as Alphabet‘s Google, TikTok parent ByteDance, and Meta Platforms.
This strong customer base has allowed Broadcom to thrive in the fast-growing custom AI processor market. The company generated $12.2 billion in revenue from sales of its custom AI chips and networking processors in fiscal 2024 (ending November 3), a remarkable surge of 220% from $3.8 billion in fiscal 2023.
Looking ahead, Broadcom forecasts its AI-related addressable market to increase to between $60 billion and $90 billion by fiscal 2027. Management stated during the latest earnings call that the company is “very well positioned to achieve a leading market share in this opportunity and expect this will drive a strong ramp from our 2024 AI revenue base of $12.2 billion.”
A key factor favoring Broadcom is its dominant share of the ASIC market, with J.P. Morgan estimating it commands between 55% and 60% of the custom chip market. If this holds true and the company captures even half of this market, its annual AI revenue could rise to between $30 billion and $45 billion.
This data indicates that Broadcom’s AI revenue has the potential to amplify by 2.5 to 4 times within the next three years, prompting analysts to elevate their expectations for the current and subsequent fiscal years.
The chart shows an encouraging acceleration in Broadcom’s revenue, concluding fiscal 2024 with organic revenue growth of 9%, excluding VMware’s acquisition completed in November 2023. The company finished fiscal 2024 with consolidated revenue of $51.6 billion, with expectations for healthy double-digit growth over the next few years.
The case for Marvell Technology
Marvell, being the second-largest player in the ASIC market with an estimated 13% to 15% market share, is also experiencing robust demand for its custom AI chips from industry giants like Alphabet, Microsoft, and Amazon.
In fiscal 2025’s third quarter, culminating on November 2, Marvell recorded a 98% increase in data center revenue to $1.1 billion, indicating strong performance attributed to its AI business, despite only a 7% year-over-year overall revenue increase to $1.52 billion.
The current quarter forecasts indicate further improvement, with guidance of $1.8 billion in revenue pointing to a 26% year-over-year increase. The anticipated earnings of $0.59 per share would be a significant rise compared to the last quarter’s mere 5% increase from the equivalent period last year.
This positive outlook stems from unexpected growth in AI segment revenues, initially projected at $1.5 billion for the current fiscal year, which Marvell believes it will notably exceed due to surging demand.
Management mentioned that it has “secured supply chain capacity to support our customers’ growth forecast,” possibly indicating future potential to meet increasing demand.
Ultimately, Marvell’s AI revenue is expected to hit $2.5 billion in the next fiscal year, with further growth expected in subsequent years. The projected overall revenue is set to soar by 41% in the next fiscal year to $8.11 billion, demonstrating a solid growth trajectory.
The verdict
Both Marvell and Broadcom are poised for impressive growth. However, Marvell is expected to achieve this at a faster pace, attributed to its smaller size and potential market share gains in custom AI chips, which also influences its higher valuation compared to Broadcom.
Investors seeking rapid growth might lean towards Marvell, while those favoring a slightly cheaper option with a dominant position in the AI market may find Broadcom appealing.
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