Broadcom’s Stock Rises Again:
On June 16th, shares of U.S. semiconductor company Broadcom surged by 11.21%, closing at $250. This follows a 24.4% spike on the previous trading day, marking two consecutive days of sharp increases. Broadcom’s market capitalization has now expanded to $1.167 trillion, having crossed the $1 trillion mark for the first time just days earlier.
Nvidia’s Stock Decline Continues:
In contrast, Nvidia’s stock dropped by 1.68% to $132, marking the third consecutive trading day of decline. Its market cap has decreased to $3.232 trillion, causing it to relinquish its position as the second-largest U.S. company to Microsoft.
The diverging stock performance reflects growing speculation that Broadcom could challenge Nvidia's dominance in the AI chip market.
Broadcom Expanding AI Chip Partnerships:
Broadcom recently announced during its quarterly earnings report on June 12th that it is developing AI chips with three major cloud companies. These companies are believed to be Google, Meta (Facebook's parent company), and China’s ByteDance (operator of TikTok).
Hock Tan, Broadcom’s CEO, stated that these companies are expected to deploy approximately 1 million customized AI chips developed with Broadcom in their data centers by 2027.
Additionally, reports suggest:
Apple is collaborating with Broadcom on custom AI chip development, as reported by The Information.
OpenAI is reportedly developing its own AI chips in partnership with Broadcom, according to an earlier Reuters report.
This strategic shift by Big Tech to develop custom AI chips with Broadcom signals an effort to reduce their reliance on Nvidia. While Broadcom does not produce standalone AI chips like Nvidia, its tailored chip development strategy positions it as a formidable competitor, threatening Nvidia’s 80% market share in AI chips.
Nvidia Enters Correction Territory:
Nvidia’s continued decline has pushed its stock into correction territory. According to CNBC, Nvidia’s stock has fallen 10.9% from its all-time closing high of $148.28 on May 12th. A correction is generally defined as a 10% or greater drop from a stock’s peak price.
Despite the Nasdaq Composite rising 1.24% on the day, Nvidia was the only stock among the "Magnificent Seven" (Tesla, Alphabet, Amazon, Apple, Microsoft, Meta, and Nvidia) to decline, while Tesla and Alphabet gained 6.14% and 3.54%, respectively.
Market Analysis and Warnings:
Keith Lerner, Co-CIO at Truist Advisory Services, commented, “Nvidia and its chips remain critical for AI infrastructure, but the market is acknowledging other beneficiaries in the AI ecosystem.”
Some analysts have raised concerns about potential further declines in Nvidia’s stock. Investment bank ROTH MKM warned that if Nvidia’s stock continues its downward pattern, it could signal broader market trouble, noting the $125–$130 range as a critical support level.
Conclusion:
Broadcom’s rise reflects its strengthening partnerships with Big Tech and its expanding role in the AI chip market, while Nvidia’s recent decline underscores growing competition and market adjustments. Investors are closely monitoring Nvidia’s performance amid concerns of a sustained correction phase.
