Better Artificial Intelligence (AI) Stock: Broadcom vs. Marvell Technology

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Semiconductor stocks Broadcom (NASDAQ: AVGO) and Marvell Technology (NASDAQ: MRVL) 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 that are being deployed in data centers for tackling artificial intelligence (AI) workloads.

Broadcom stock is up 124% this year, and Marvell stock has logged gains of 93% as of this writing. But if you had to choose one of these two 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 looking to develop chips in-house to reduce their reliance on expensive semiconductors from the likes of Nvidia. This is where Broadcom steps in; it is 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 make the most of the fast-growing custom AI processor market. The chipmaker generated $12.2 billion in revenue from sales of its custom AI chips and networking processors in fiscal 2024 (which ended on Nov. 3). That was a remarkable surge of 220% from the $3.8 billion in revenue that the company generated from AI chips in fiscal 2023.

The good part is that Broadcom is forecasting its AI-related addressable market to increase to a range of $60 billion to $90 billion by fiscal 2027. Management pointed out on the latest earnings conference 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 that will work in Broadcom's favor is its strong share of the ASIC market. J.P. Morgan estimates that it commands between 55% and 60% of the custom chip market. If that's indeed the case after the next three years and the company manages to corner even half of this space, its annual AI revenue could range from $30 billion to $45 billion (based on the company's estimated size of the custom AI chip market).

So, Broadcom's AI revenue has the potential to increase by a multiple of 2.5 to 4 in the next three years. This explains why analysts have bumped up their expectations for the current and the next two fiscal years.

AVGO Revenue Estimates for Current Fiscal Year Chart
AVGO revenue estimates for current fiscal year; data by YCharts.

The above chart points toward a nice acceleration in Broadcom's top line considering that it ended fiscal 2024 with organic revenue growth of 9% (excluding the acquisition of VMware, which was completed in November 2023).