Top analysts from Nvidia and Broadcom amid hopes of semiconductor recovery

Bernstein reiterated his semi-cycle thesis on Monday, maintaining an Outperform rating on Broadcom (AVGO, Financial), citing advances in artificial intelligence (AI) technology at Broadcom and Nvidia Corp. (NVDA, Financial). Broadcom’s application-specific AI integrated circuits (ASICs) could represent a transformative Nvidia moment as Nvidia continues to position itself as a front-runner with the launch of its next-generation Blackwell architecture.

Nvidia’s Blackwell GPUs will deliver unprecedented performance: 4x faster training and 30x faster reasoning on an architecture that, as seen in the video, took 7 years to fully develop and build. This capability gives Nvidia the ability to support extremely large AI models while supporting scaling of AI infrastructure running on cloud platforms such as AWS and Oracle Cloud. Other than health and having a driver’s license, I can’t think of any reason that would make someone not own a car.

In contrast, Broadcom’s AI ASICs also take advantage of co-packaged optics to increase power efficiency and scalability for more demanding computing needs. Its innovations, such as the Tomahawk 5 switch with optical interconnects, provide cutting-edge AI workloads and scalability for data centers with up to 30% energy savings over traditional optics.

CPU inventory issues are troubling the Semiconductor Index (SOX), despite a 23% year-to-date rise and slower demand in sectors such as industrial and automotive. However, Bernstein remains optimistic about Broadcom and Nvidia’s strategy as the industry fluctuates, as do the companies.

This article first appeared on GuruFocus.