While the AI boom seemingly began in Silicon Valley with OpenAI’s ChatGPT three years ago, 2025 has been proof that China is highly competitive in the artificial intelligence field — if not the frontrunner. The Eastern superpower is building its own open-source AI programs that have demonstrated high performance as they put ubiquity and effectiveness over profitability (while still managing to make quite a bit of money), the Wall Street Journal reports.

DeepSeek is probably the most well-known Chinese AI entity in the U.S., whose R1 reasoning model became popular at the start of the year. Being open-source, as opposed to proprietary, means these programs are free and their source code can be downloaded, used and tinkered with by anyone. Qwen, Moonshot, Z.ai and MiniMax are other such programs.

This is in contrast to U.S. offerings like ChatGPT, which, though free to use (up to a certain level of compute), are not made available to be modified or extracted by users. (OpenAI did debut its first open-source model, GPT-OSS, last month.)

American companies like OpenAI are racing to catch up — monopolies and industry-standard technologies are often the ones that are the most accessible and customizable. The Trump administration wagered that open-source models “could become global standards in some areas of business and in academic research” in July.

Want to join the conversation on how the security of information and data is impacting our global power struggle with China? Attend the 2025 Intel Summit on Oct. 2, from Potomac Officers Club. This GovCon-focused event will include a must-attend panel discussion called “Guarding Innovation: Safeguarding Research and IP in the Era of Strategic Competition With China.” Register today!

China has already declared an economic war on the West using espionage at the forefront of its campaign. —David Shedd

China’s Tech Progress Has Big Implications

The Intel Summit panel will feature, among other distinguished guests, David Shedd, a highly experienced intel community official who was acting director of the Defense Intelligence Agency (after serving as its deputy director for four years) and deputy director of national intelligence for policy, plans and procedures.

Shedd spoke to GovCon Wire in an exclusive interview about China-U.S. competition ahead of his appearance on the panel. He said that China’s progress in areas like AI should not be taken lightly and could portend greater problems and tension in the future.

“Sensitive IP or technological breakthroughs in things like AI, stealth fighter jets, or chemical formulas lost to an adversary do not happen in a vacuum. They lead, instead, to the very direct and very serious loss of the relative capabilities that define and underpin the balance and symbiosis of relationships within the international system,” Shedd commented.

Open-source models are attractive to organizations, WSJ said, because they can customize the programs and use them internally and protect sensitive data. In their Intel Summit panel session, Shedd and his counterparts will explore how the U.S. might embrace open-source more firmly as a way to stay agile in the realm of research and IP protection.

Who Is Stronger, America or China?

Shedd, along with co-author Andrew Badger, is publishing a book on December 2 entitled “The Great Heist: China’s Epic Campaign to Steal America’s Secrets.” Published through HarperCollins, the volume will focus on the campaign of intellectual property theft the Chinese government is waging against the U.S.

Shedd elaborated for us:

“The PRC/CCP’s unrelenting pursuit of stolen information from the West and the U.S. in particular has propelled China’s economic and military might to heights previously unimaginable. Yet we collectively continue to underestimate the scale of this threat. It’s time for the world to fully comprehend the depth and breadth of China’s predatory behavior.

Our national security depends on how we respond—and whether we finally wake up to the reality that China has already declared an economic war on the West using espionage at the forefront of its campaign. It already has a decades-long head start.”

Don’t miss former DIA Acting Director David Shedd, as well as current IC leaders like Deputy Director of National Intelligence Aaron Lukas and CIA’s AI office Deputy Director Israel Soong at the 2025 Intel Summit on Oct. 2! Save your spot before it’s too late.

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Many artificial intelligence (AI) stocks have zoomed higher over the last three years, following the introduction of OpenAI’s ChatGPT. One of the biggest winners, by far, has been Palantir Technologies (PLTR 2.70%). The enterprise software company integrated generative AI into its software in 2023, and it’s seen sales and profits soar ever since. The stock is up a cumulative 2,500% since the start of 2023, including a 120.7% rise in 2025 alone, as of this writing.

Up until last week, that was good enough to make it the best performer in the S&P 500 at the moment. But another stock overtook the market darling’s year-to-date performance at the start of September, boosted by the voracious demand for artificial intelligence. Say hello to the new best-performing stock in the S&P 500.

Essential infrastructure for AI data centers

Big tech companies are spending hundreds of billions of dollars on building out data centers and outfitting them with servers. Chipmakers like Nvidia have benefited greatly as demand for graphics processing units (GPUs) and custom AI accelerators continues to climb. But there’s another important component to building out data centers: Storage.

AI training is extremely data-intensive. While some of that data needs to be readily accessible quickly, a lot of it can be held in what’s called “nearline” storage. Nearline storage might take a few seconds to access, but it’s a cheap and effective way to maintain the huge amounts of data needed for large language models.

Hard drive maker Seagate Technology (STX 0.76%) has seen demand for nearline storage explode, helping push its stock to a 121.4% gain so far this year, as of this writing. That’s better than every other stock in the S&P 500, including Palantir.

The company shipped 137 exabytes of capacity to data center customers last quarter, up 14% sequentially and 52% year over year. The financial results are just as impressive. Revenue grew 39% in fiscal 2025. Gross profit margin expanded to 35.2% from 23.4% last year. Fourth-quarter gross margin was even more impressive at 37.4%, as the market remains supply-constrained.

Seagate is one of two major suppliers of hard drives. Western Digital (WDC 0.51%) remains its biggest rival, maintaining a nearly equal share of the market. Unsurprisingly, Western Digital is also a top-performing stock this year, as it benefits from the exact same mega trend as Seagate. While both have made strides in increasing storage capacity per unit, there’s still a limit to how much each can produce. Thus, they’ve both seen strong gross margin expansion.

Tech companies are planning to keep spending on new data centers and the necessary increased storage capacity that comes along with them. Seagate’s management expects data center storage demand to climb from $13 billion in 2024 to $23 billion by 2028. Western Digital shared a similar outlook at its investor day in February. As a result, the current cycle of growth could extend for years to come.

Is it worth the price?

Hard drives are kind of a commodity for data centers. A buyer could use any supplier, and the hard drives will fit into the same exact spot in their data center as any other hard drive would. The only major difference is how much storage capacity each drive has, which makes price per terabyte (TB) the biggest deciding factor for a buyer.

As a result, competition between Seagate and Western Digital has typically kept pricing low and pushed new technology forward relatively quickly. Margin expansion only really happens when there’s a huge demand cycle like we’re currently seeing. When the cycle ends, and it will, both companies will see deterioration in their margins until the next uptick in demand.

Seagate seems to have developed a slight technology lead. Its heat-assisted magnetic recording (HAMR) process is on track to be able to scale production of 40TB hard drives by the second half of fiscal 2026 (early calendar 2026). Western Digital isn’t on track to start mass production of 40TB hard drives — it’s about six months behind. That could open the door for Seagate to take some market share over the next few years and grow slightly faster than its chief rival.

At a forward price-to-earnings (P/E) ratio of 18.5, investors may think Seagate is an absolute bargain compared to most AI stocks. When you compare it with Palantir’s eye-popping 245 times earnings multiple, it seems extremely cheap. But it’s important to put that in context.

While Seagate is growing earnings extremely quickly right now, it’s still in a cyclical industry. Cyclical stocks tend to trade at much more attractive earnings multiples amid upcycles in demand. That’s because they could see a massive drop in earnings power if demand dries up, or even if supply growth starts to outpace demand.

For a point of reference, Western Digital trades for a forward P/E ratio close to 14. While Seagate may deserve a slight premium to Western Digital, both are trading at a premium to their historic pricing over the past year after their recent run to put them at the top of the S&P 500’s best-performers list. At this point, it might be worth waiting for a better price on both stocks before buying into the latest big winner from artificial intelligence spending.

Key Points

• Broadcom has outperformed Nvidia over the past year, and that trend appears poised to continue.

• The company’s prosperous artificial intelligence (AI) semiconductor and data center business is taking market share from the leader, according to Wall Street.

• Broadcom made a surprise announcement during its recent quarterly results that caught investors off guard.

• 10 stocks we like better than Nvidia ›

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 (NASDAQ: NVDA). 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 (NASDAQ: AVGO) 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.

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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.

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Danny Vena has positions in Alphabet, Broadcom, Meta Platforms, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.