Broadcom's Quiet War On Nvidia: CEO Touts Custom AI Chips, Ethernet Over NVLink—'No Reason To Create A New Standard'

Chipmaker Broadcom Inc. AVGO is drawing a line in the sand in the AI infrastructure battles, and it’s doing so with custom AI chips and a commitment to open networking protocols.

What Happened: During the company's second-quarter earnings call, CEO Hock Tan took a thinly veiled swipe at Nvidia Corp. NVDA for pushing its custom systems for connecting AI chips, a reference to the latter’s NVLink architecture, and other emerging proprietary standards, aimed at turning the industry into a walled garden.

When asked about the rise of competing ecosystems in AI networking, including NVLink and UALink, Tan stated rather bluntly that “there's no reason to create a new standard for something that could be easily done in networking in Ethernet.”

Tan emphasized Broadcom's commitment to open standards like Ethernet, calling it the “only true” open-source protocol compared to the closed alternatives being promoted by some rivals. “Most of them, by the way, are proprietary, much as they like to call it otherwise,” he said.

He added that Ethernet has already proven itself over decades of use in traditional networking. "We believe Ethernet will prevail, as it does before for the last twenty years in traditional networking," Tan noted.

Broadcom is becoming a key supplier for tech giants that are building massive AI data centers. Instead of relying entirely on off-the-shelf chips like Nvidia's, these companies are working with Broadcom to design their specialized AI chips, tailored to their individual needs and requirements.

According to Tan, custom accelerators make it possible for customers to optimize the hardware for the software, which eventually results in “way higher performance than you otherwise could.”

Why It Matters: Several leading analysts have taken a bullish stance on the stock in recent weeks, with 8 being “Bullish” and 5 “Somewhat Bullish,” with the high-end of the Price Target at $301, representing an upside of 15.80% from current levels.

The Chief Global Strategist at Freedom Capital Markets, Jay Woods, referred to Broadcom as “basically Nvidia’s baby brother,” which has been under its shadow for several years, and is just beginning to break out.

The company reported $15 billion in revenue during its second quarter results, up 20% year-over-year, and ahead of consensus estimates at $14.99 billion.

It posted a profit of $1.58 per share, against estimates at $1.56, driven by strong momentum across its AI semiconductor solutions and its subsidiary, VMware.

Price Action: The stock was down 0.44% on Thursday, trading at $259.93, and is down 4.20% after hours, following the company’s second quarter results.

According to Benzinga’s Edge Stock Rankings, Broadcom scores well on Momentum and Quality, but is weak in terms of Value and Growth. It also has a favorable price trend in the short, medium, and long term. How does it compare with Nvidia? Click here for deeper insights.

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