Broadcom vs. AMD: The Smarter AI-Chip Investment After Recent Market Slump

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Key Points

• Broadcom’s revenue is projected to grow 84% year-over-year this quarter, with AI chip sales expected to hit $16 billion.

• AMD’s data center revenue jumped 57% year-over-year in Q1, with guidance indicating accelerating growth.

• One of these stocks trades at roughly half the earnings multiple of the other this year.

Chip stocks endured a historically harsh week, culminating in the PHLX Semiconductor Index plunging over 20% from its June high. Two AI sector cornerstones—Advanced Micro Devices (NASDAQ: AMD) and Broadcom (NASDAQ: AVGO)—followed suit. AMD’s shares now trade 15% below peak levels, while Broadcom’s have dipped near 25%. Despite sharp sell-offs, both companies remain operationally robust, creating a compelling comparative opportunity.

AMD: Growth Amid Premium Valuation

Q1 results showcased AMD’s momentum: revenue surged 38% year-over-year to $10.3 billion, driven by data center demand. AI accelerator sales, a strategic focal point, grew revenue by 57% in the segment to $5.8 billion. Non-GAAP earnings per share rose 43% to $1.37, alongside record free cash flow of $2.6 billion.

Management anticipates accelerated demand for its MI450 accelerators and Helios systems, with leading customers forecasting higher consumption than current projections. Second-quarter guidance suggests ~46% year-over-year growth, up from Q1’s 38%.

However, AMD’s valuation remains steep—a $500 share price reflects 67x this year’s expected earnings and 37x next year’s, with no dividend. Sustained AI leadership is baked into the price, leaving limited margin for error.

Broadcom: Cheaper, Faster Expansion

Broadcom’s Q2 results exceeded expectations: revenue climbed 48% to $22.2 billion, with AI semiconductor revenue soaring 143% to $10.8 billion. Adjusted net income hit $12.1 billion, and free cash flow hit $10.3 billion—46% of revenue.

CEO Hock Tan forecast AI chip sales reaching $16 billion this year, a 200%-plus year-over-year surge. Full-year guidance calls for $29.4 billion in revenue growth at 84%.

Theer’s infrastructure software segment grew 9% but remains stable. AI business reliance on hyperscalers introduces execution risks, yet cash flow and valuation offset concerns. At $370 per share, it trades at 32x this year’s earnings and 19x next year’s—a stark contrast to AMD’s multiple.

Purchase Recommendation: Broadcom Edges Out

While AMD’s AI accelerator roadmap could deliver explosive upside, Broadcom offers immediate advantages: faster growth guidance (84% vs. AMD’s 46%), superior cash flow, and a 50% cheaper valuation. The dividend adds income potential, making Broadcom our pick for disciplined investors prioritizing value and scale.

Is AMD Still a Buy Today?

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*Stock Advisor returns as of July 2026.

The Motley Fool holds positions in AMD and Broadcom. Analysts have no current stakes.

Views expressed here do not constitute investment advice and may not align with Nasdaq, Inc. standards.

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