Broadcom Outperforms Marvell in Custom AI Chip Market

Custom AI chips, also known as ASICs, are gaining popularity in the tech industry due to their superior cost performance compared to traditional GPU-based training. Broadcom and Marvell Technology are two companies that produce networking equipment for data centers and have launched custom AI chip businesses with several critical customers.

Broadcom's custom chip business is larger than Marvell's and boasts clients such as Alphabet, Meta Platforms, OpenAI, and Anthropic. Marvell, on the other hand, has captured Amazon and Microsoft as clients.

One key metric that decides which stock is the better buy is growth potential. Broadcom is expected to grow 64% in revenue by fiscal year 2027, while Marvell's growth is estimated at 45%. Additionally, Broadcom is trading at a lower price compared to Marvell, making it a more attractive option for investors.

Custom AI chips are expected to continue growing in popularity beyond 2027, especially as they prove to be more cost-effective than GPUs. Amazon's custom AI chip, Trainium, has shown to be 30% to 40% more cost-effective than GPU-based training.