Broadcom is coming for Nvidia quick, however can it break its ecosystem lock-in?

Why it issues: Many of Nvidia’s rivals wish to steal a few of its market dominance. One identify that retains arising is Broadcom. A more in-depth look tells us why. Its XPUs devour lower than 600 watts, making them one of the power-efficient accelerators within the trade.

In a observe to traders this week, Bank of America stated, “Consider it a prime AI decide.” It wasn’t speaking about Nvidia, despite the fact that BofA considers Green Team the undisputed winner of the GPU wars. It was referring to Broadcom, which not too long ago introduced a 10-to-1 inventory cut up and better-than-expected income in its second-quarter earnings report. The firm projected a higher-than-anticipated $51 billion in gross sales for the 2024 fiscal yr.

Bank of America’s analysts undertaking the corporate’s 2025 fiscal yr gross sales to be $59.9 billion, for a 16-percent year-over-year acquire. Analysts level to effectivity positive aspects from Broadcom’s VMWare acquisition final yr, upsells, and its potential development in customized chips as key indicators for its 2025 predictions. If BofA is true, Broadcom’s market cap may put it into the Trillion Dollar Club with a handful of different tech luminaries, together with Microsoft, Apple, Nvidia, Amazon, Alphabet, and Meta.

For this to occur, it should butt heads with Nvidia, which at the moment has a market cap lead of $3.4 trillion to Broadcom’s $804 billion. Moreover, Nvidia’s CUDA structure has gained a near-monopoly in AI workloads for hyperscalers like Meta, Microsoft, Google, and Amazon, its largest prospects. It has an unlimited ecosystem of software program, instruments, and libraries constructed round it that has additional locked in prospects and created a excessive barrier to entry for rivals like Broadcom.

Each of these corporations would love to cut back their reliance on Nvidia, so Broadcom is positioning itself as a substitute by providing customized AI accelerator chips, referred to as XPUs, to cloud and AI corporations. At a current occasion, Broadcom famous that demand for its merchandise is snowballing, stating {that a} state-of-the-art cluster two years in the past had 4,096 XPUs. In 2023, it constructed a cluster with over 10,000 XPU nodes that required two layers of Tomahawk or Jericho switches. The firm’s roadmap is to increase this to over 30,000 and finally a million.

An benefit that Broadcom emphasizes is the facility effectivity of its XPUs. At lower than 600 watts, they’re among the many lowest-power AI accelerators within the trade.

It additionally has a special worldview of the chip market, which it says is shifting from CPU-centric to connectivity-centric. The emergence of other processors past the CPU, such because the GPU, NPU, and LPU, requires high-speed connections, which is Broadcom’s specialty.

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