Since the dawn of the artificial intelligence (AI) era, a number of players have been at the leading edge of the technology. Perhaps no company has exemplified the vast potential of AI more than Nvidia (NVDA 3.91%). Since early 2023, the chipmaker’s stock has surged more than 1,000% (as of this writing) as its graphics processing units (GPUs) have become the gold standard for facilitating the technology.

However, investors may be surprised to learn that Broadcom (AVGO 10.07%) has actually outperformed Nvidia over the past year, as its stock has soared 149% compared with 63% for Nvidia. Furthermore, several pronouncements by the company during its recent quarterly report suggest that trend is poised to continue.

Let’s look at what’s driving Broadcom’s robust rally and why I predict the company is on track to be the next Nvidia.

The next big winner

Nvidia’s GPUs have transformed AI by providing the massive computational horsepower required to power AI models. These lightning-fast chips offer extremely flexible use cases and are unmatched for this purpose, which is why Nvidia has thrived over the past few years.

It’s also no surprise that Broadcom has benefited from the accelerating adoption of AI, as the company’s Ethernet switching and networking products have long been a staple in data centers. However, Broadcom’s application-specific integrated circuits (ASICs) have been gaining ground. These custom-designed AI accelerators, which Broadcom calls XPUs, are tailored to specific tasks and therefore more energy efficient. Rapid adoption of this chips has fueled a blistering run for Broadcom stock, which is up more than 500% since early 2023, earning its membership in the $1 trillion club.

In the third quarter, Broadcom generated record revenue that accelerated 22% year over year to $15.9 billion, resulting in adjusted earnings per share (EPS) that jumped 36% to $1.69. The company was clear that it was AI that was driving this train, as its AI-specific revenue accelerated 63% year over year to $5.2 billion. The results were well ahead of Wall Street’s expectations, as analysts’ consensus estimates called for revenue of $15.82 billion and adjusted EPS of $1.66.

For context, in its fiscal 2026 second quarter (ended July 27), Nvidia’s data center segment, driven primarily by AI, grew 56% year over year, down from 73% growth in Q1, which shows its growth is decelerating.

However, it was management’s commentary that gave investors cause to celebrate, as Broadcom delivered two pieces of news that bode well for the future.

First, Broadcom stated that it continues to expand its business with its three biggest hyperscale customers. While the company doesn’t disclose who these customers are, they are widely believed to be Alphabet, Meta Platforms, and TikTok parent ByteDance. During the conference call to discuss the results, CEO Hock Tam said, “We continue to gain share at our three original customers.” He went on to say the company is forecasting its AI-centric growth to be higher next year, accelerating compared to the 50% to 60% growth it expects in 2025.

The other big development was that Broadcom confirmed the addition of a fourth big hyperscale customer, which many analysts believe to be OpenAI. The company said this new client moved from prospect to “qualified customer,” and had approved production of “AI racks based on our XPUs.” As a result, Broadcom boosted its backlog by $10 billion to $110 billion.

The next Nvidia?

Wall Street’s reaction to Broadcom’s results was decidedly bullish, as no fewer than 16 analysts boosted their price targets on the stock. Many of these cited the accelerating demand for Broadcom’s ASICs as a factor.

Ben Reitzes of Melius Research views Broadcom as a “Magnificent Eight” stock, arguing that it should be added to the Magnificent 7 stocks. He goes on to say that he has long believed that Nvidia’s share would fall over time, with Broadcom eventually taking a roughly 30% share of the AI compute market.

That said, Reitzes also believes that a rising tide lifts all boats, and both companies will be massive winners as the adoption of AI continues to gain steam. That said, the analyst points out that over the long term, Nvidia’s CUDA programming library shouldn’t be underestimated, as this software ecosystem is favored by developers and provides Nvidia with a significant competitive advantage.

So while Broadcom will likely be the next Nvidia, the demand for AI continues to climb, and the market will be able to support two major players, so Nvidia and Broadcom will likely both be market-beating investments from here.

From a valuation perspective, the recent spike in Broadcom’s stock price has seen a commensurate increase in its multiple. Broadcom stock is currently selling for 37 times next year’s earnings, compared to 27 for Nvidia. Both are trading for a premium, but both are also well-positioned to profit from the growing adoption of AI.