Nvidia's big drop presents an opportunity. Can the AI feast under Broadcom's high valuation continue?

$Broadcom(AVGO.US) Semiconductor giant Broadcom will release its Q3 2025 earnings report, with market expectations of revenue reaching $15.823 billion, a 21.04% YoY increase, and earnings per share of $1.66, turning a loss into profit YoY. The AI business is the biggest highlight, with related revenue surging 64.9% YoY to $5.1 billion, further solidifying its position as the core growth engine.

Many institutions are optimistic about Broadcom. UBS expects the company may raise its Q4 performance guidance, particularly bullish on the boost from Google's TPUv6p chip acceleration. Goldman Sachs lists it as a core recommendation in the AI semiconductor field, with a target price of $315. Oppenheimer even gives a target price of $325, emphasizing Broadcom's leading position in the AI custom chip market, second only to NVIDIA.

With its "computing power + connectivity" dual-engine strategy, Broadcom is deeply tied to hyperscale enterprises like Google and Meta, with AI-related revenue accounting for 41% of its total semiconductor revenue. The next-generation 3nm ASIC chips are planned for mass production in the second half of 2025, with performance comparable to NVIDIA's flagship products. Meanwhile, the AI data center chip market is expected to jump from $123 billion in 2024 to $207 billion in 2025, a 67% increase, with cloud service providers' continued AI investments being the key driver.

This does look quite attractive, but I'm hesitant because the current valuation is a bit high (forward P/E ratio of 113.25x). I choose to add NVIDIA instead, which has fallen for 5 consecutive days—thanks to the pullback for letting me get on board!!

$NVIDIA(NVDA.US) $AMD(AMD.US)