Key Points
The last few weeks haven’t been kind to Nvidia (NASDAQ: NVDA) and Broadcom (NASDAQ: AVGO) shareholders. Both stocks have slumped from their recent highs, with Nvidia down around 18.5% and Broadcom down 24.4%. These two are among the biggest names in artificial intelligence (AI) investing, and have been great investments to purchase when they’re down around 20% from their all-time highs.
So, is now the perfect time to load up on shares? Or is there something else going on this time around? Let’s take a look.
The market is losing sight of the big picture again
Both Broadcom and Nvidia are expected to be great investments due to the massive investment in AI computing infrastructure. Nvidia makes GPUs (graphics processing units) and several products to support their usage in a data center, and its products are by far the most popular to use for AI computing right now. GPUs are general-purpose computing units that can handle nearly any workload thrown at them, but sometimes a GPU only sees one type of work its entire service life, and that flexibility is wasted.
Instead, some AI hyperscalers are partnering with Broadcom to design custom AI chips. Custom AI chips excel in only one application, but in that specific application, they deliver better cost-performance. This avenue is becoming more popular with AI hyperscalers, and several customers are expected to ramp up their spending this year and next.
Both solutions will be popular in the future, so declaring Nvidia or Broadcom an outright winner will be impossible. Instead, I think investors should view these two as great AI investment partners, as each allows them to capitalize on the truly massive sums the AI hyperscalers are spending.
But if that’s the case, then why are the stocks down?
The market goes through hype cycles where it’s excited about AI, then bearish on it. We’re in a bearish sentiment cycle right now, as concerns grow about the amount of money being spent on AI data centers. However, many investors are forgetting that the AI hyperscalers have repeatedly told investors that the risk of underspending is far greater than that of overspending. Spending is expected to increase again in 2027.
Broadcom has already given guidance that AI semiconductor revenue will exceed $100 billion by 2027. Wall Street analysts estimate Broadcom’s total revenue will reach $172 billion next year, rising 62% from this year’s totals.
Nvidia has made similarly bullish calls, with it estimating that AI hyperscalers’ capital expenditures will top $1 trillion next year, up from $650 billion in 2026. Those are some strong calls, and with many of Nvidia and Broadcom’s clients working on multi-year build-out schedules, these two have high visibility into what’s coming over the next few years.
They’re clearly bullish on the future, and I think investors should be too, since each is trading at a great price.
Both stocks look pretty attractive
Because Broadcom and Nvidia are growing so fast, using the forward price-to-earnings ratio is the best way to value them. I think it’s also wise to look at their valuations from a 2027 perspective, since each is expected to put up strong growth again. From these standpoints, both stocks look attractively priced.
Data by YCharts.
Buying opportunities for Nvidia and Broadcom don’t come around all that often, and now is a great time to scoop up shares. As more earnings roll out and AI hyperscalers confirm their spending plans, it will be a positive catalyst for each stock and could send them soaring.
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Keithen Drury has positions in Broadcom and Nvidia. The Motley Fool has positions in and recommends Broadcom and Nvidia. The Motley Fool has a disclosure policy.
