AMD vs. Broadcom: Which Semiconductor Stock Has Greater Upside?

Advanced Micro Devices AMD and Broadcom AVGO are key providers of semiconductor chips that power artificial intelligence (AI). Chips from these companies support running of Large Language Models that form the backbone of Generative AI (Gen AI). Growing AI deployment bodes well for both AMD and AVGO. The Semiconductor Industry Association (SIA) expects double-digit growth rate in 2025 with semiconductor sales surging 19.1% to $627.6 billion in 2024. However, both AMD and Broadcom shares have suffered from tech sell-off year to date (YTD) amid rising fears of a recession following U.S. President Donald Trump’s decision to levy tariffs on top trading partners, including China, Mexico and Canada, which has increased the chances of a trade war. Semiconductor companies, including Broadcom and AMD, import key parts to international markets, which makes them vulnerable to a trade war.While AMD shares have lost 35.3% YTD, AVGO dropped 32.1%.AMD and AVGO Stock Performance Image Source: Zacks Investment Research So, AMD or Broadcom, which is a better buy amid the challenging macroeconomic backdrop? Let’s find out.AMD’s Strong Portfolio, Rich Partner Base Key CatalystAMD is gaining traction in the cloud-data center and AI chip markets with its portfolio of fifth-gen EPYC Turin, fourth-gen and third-gen EPYC processors as well as Instinct accelerators and ROCm software suite. AMD delivered more than $5 billion in data center AI revenues in 2024, driven by deployments of MI300X by Meta Platforms and Microsoft. EPYC instances increased 27% in 2024 to more than 1000, with hyperscalers like Amazon Web Services, Alibaba, Google, Microsoft, and Tencent launching more than 100 general-purpose AI instances in the fourth quarter of 2024 alone. AMD Instinct accelerators saw strong demand from a dozen cloud service providers, including IBM and Digital Ocean, and the company expects this number to grow in 2025. AMD’s MI325X is currently under production. Its next-generation MI350 series, based on CDNA 4 architecture, promises a 35 times increase in AI compute performance compared with CDNA 3. The company plans to ship samples to lead customers in the current quarter and is on track to accelerate production shipments to mid-year. The development of the MI400 series is also progressing well, and it remains on track to launch in 2026.AMD has been on an acquisitive spree to strengthen its AI ecosystem with buyouts like ZT Systems, Helsinki-based Silo AI, Nod.ai and Mipsology.Broadcom Rides on Strong Demand for XPUsStrong demand for Broadcom’s application-specific integrated chips (ASICs), designed to support AI and machine learning and make these tasks more efficient, aids top-line growth. Custom AI accelerators (XPUs), which are a type of ASICs, are necessary to train Gen AI models, and they require complex integration of compute, memory, and I/O capabilities to achieve the necessary performance at lower power consumption and cost.AVGO’s next-generation 3-nanometer XPUs are the first of its kind to market in that process node. Broadcom is on track for volume shipment at hyperscale customers in the second half of fiscal 2025. AVGO is now planning to develop the industry’s first 2-nanometer AI XPU packaging 3.5D and targets scaling clusters of 500,000 accelerators for hyperscale customers.AVGO believes that by 2027, each of its three hyperscalers plans to deploy 1 million XPU clusters across a single fabric. Serviceable Addressable Market for XPUs and network are expected to be between $60 billion and $90 billion in fiscal 2027 alone. Broadcom’s rich partner base, including NVIDIA, Arista Networks, DELL, Juniper and Supermicro, has been a key catalyst. AVGO expects second-quarter fiscal 2025 AI revenues to jump 44% year over year to $4.4 billion. Semiconductor revenues are expected to surge 17% year over year to $14.9 billion.AVGO’s Earnings Estimate Revision Positive, AMD’s SteadyThe Zacks Consensus Estimate for AVGO’s fiscal 2025 earnings is pegged at $6.60 per share, up 4 cents over the past 30 days, indicating a 35.52% increase over fiscal 2024’s reported figure. Broadcom Inc. Stock Price and Consensus Broadcom Inc. price-consensus-chart | Broadcom Inc. Quote However, the consensus mark for AMD’s 2025 earnings has been steady at $4.59 per share over the past 30 days, suggesting 38.67% growth over 2024. Advanced Micro Devices, Inc. Stock Price and Consensus Advanced Micro Devices, Inc. price-consensus-chart | Advanced Micro Devices, Inc. Quote Both AVGO’s and AMD’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters. However, Broadcom’s average surprise of 3.44% is better than AMD’s surprise of 2.32%, reflecting good quality of earnings beat on a consistent basis.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Valuation: AMD is Cheaper Than AVGOValuation-wise, both AMD and Broadcom are overvalued, as suggested by the Value Score of D. However, in terms of forward 12-month Price/Sales, AMD shares are trading at 3.77X, lower than AVGO’s 10.99X.AMD and AVGO Valuation Image Source: Zacks Investment Research AVGO is a Better Buy Right NowBroadcom’s expanding AI portfolio, along with a rich partner base, reflects solid top-line growth potential. AMD’s near-term prospects are dull, given the weakness in the Gaming and Embedded segment and stiff competition from NVIDIA in the Data Center space.Currently, Broadcom has a Zacks Rank #1 (Strong Buy), making the stock a must-pick compared with AMD, which has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report Broadcom Inc. (AVGO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks