The Advancement of Broadcom in the AI Market and Implications for Nvidia Investors

Amid the rapid growth of the artificial intelligence (AI) chip market, Broadcom is enhancing its presence with custom AI accelerators and ASICs as weapons. The company is expected to record $12.2 billion in AI-related revenue for the 2024 fiscal year, with major customers such as Google and Meta.
While Nvidia continues to boast overwhelming revenue in the datacenter business, the slowdown in its growth rate is drawing attention. With the AI-dedicated ASIC market forecasted to grow at an average annual rate of 32% until 2030, and the overall AI chip market continuing to expand, there is a high probability that Nvidia's GPU demand will remain a long-term driving force. As Broadcom's progress impacts the market structure, Nvidia investors should prepare for a new competitive environment.

Broadcom is strengthening its product deployment focusing on custom AI accelerators and ASICs, and has acquired industry giants such as Google, Meta, ByteDance, and OpenAI as key customers. In the 2024 fiscal year, the company reported $12.2 billion in AI-related revenue, demonstrating a significant presence in the custom chip market. Particularly, the trend of companies seeking dedicated chips to support their own AI workloads has boosted Broadcom's growth.
As predicted by McKinsey that "most workloads will be handled by ASICs", amid the demand for efficiency and cost advantages, the AI Accelerator Market is expected to deepen its reliance on ASICs. However, Broadcom's success goes beyond product offerings. CEO Hock Tan emphasizes that close partnerships such as customer-specific roadmap design and fabric deployment are the foundation of growth. The market expansion forecast by the company until 2027 ($60 billion to $90 billion) is also attributed to the results of cloud service providers' strategic transformation.

On the other hand, differentiation from the GPU market led by Nvidia is becoming clearer. The growth of ASICs will depend on whether the demand for specific-purpose chips only, or if it will affect Nvidia's market share, which will be determined by future technological innovations and customer needs.
Nvidia's Blackwell Architecture and Foundation for Long-term Growth.

Nvidia is currently transitioning to next-generation AI data center chips based on the Blackwell architecture, which is being touted as the company's next growth driver. This architecture is expected to further enhance the capability to handle high-performance AI workloads, symbolizing the evolution of GPUs following the existing A100 and H100.
While Nvidia's data center business has recorded revenues of $79.6 billion, the slowing growth rate is a cause for concern. This is a natural phenomenon for companies that have already achieved a large revenue base, and a smooth transition to next-generation products is crucial for future revenue expansion. In addition, with the forecast that the overall AI chip market will reach $621 billion, Nvidia still holds a central position in the market.
Uniquely, Nvidia's long-term success will hinge not only on GPU offerings but also on the system integration capabilities and expansion of the software ecosystem across the accelerator market as a whole. Technological innovations through the Blackwell architecture are likely to be a key pillar shaping its future.

While Broadcom's growth is impressive, it is not appropriate to oversimplify the direct competitive relationship with Nvidia. Broadcom has established a competitive advantage in the specialized market of ASICs, while Nvidia maintains dominance in the broader AI accelerator market. The projected growth of the AI accelerator market to $500 billion by 2028, as forecasted by AMD, suggests that both companies have room to share the market by meeting different needs.
What is crucial is how each company will develop its respective technologies and market strategies. While Broadcom aims for further specialization and expansion in the ASIC market, Nvidia is likely to continue leading the overall market through the deepening of the GPU market and entry into the accelerated computing field. The coexistence of companies responding to such diverse market needs will further drive the evolution of AI technology.