The "replacement" battle of NVIDIA Corporation (NVDA.US): Is Marvell more suitable than Broadcom Inc.?

With the increasingly fierce competition in the AI chip market, chip companies seem to be "on edge", and the market share of the dominant player NVIDIA Corporation (NVDA.US) is also threatened by the "two major contenders" Broadcom Inc. and Marvell. Analysis suggests that although Broadcom Inc. (AVGO.US) currently holds about 70% of the market share in the custom AI chip market, Marvell, with its advantageous position in cloud computing clients, greater growth potential, and more attractive valuation, may have the upper hand and be more capable of challenging NVIDIA Corporation than Broadcom Inc. NVIDIA Corporation faces challenges from the "competition", Marvell strengths emerge In the past three months, as Broadcom Inc. and Marvell actively assisted tech giants such as Alphabet Inc. Class C, Amazon.com, Inc. in developing custom AI chips, their revenues soared, and both companies have become favored by investors, with their stock prices rising by over 30%. In contrast, the AI chip dominator NVIDIA Corporation is experiencing slower revenue growth and its stock price appears dim. Investors seem to believe that at least Broadcom Inc. may eventually break NVIDIA Corporation's control of the AI chip market. Raymond James analyst Srini Pajjuri stated: "Broadcom Inc. is currently the leader in manufacturing custom AI chips, with Marvell closely following. They are the only two major companies in the U.S. heavily involved in this business." As the "only two" in the U.S., the "competition" between Broadcom Inc. and Marvell has also begun. In early December last year, Broadcom Inc. CEO Hock Tan boldly promoted the potential of the custom AI chip market, claiming that the company's three major clients, including Alphabet Inc. Class C, could spend $60-90 billion annually on custom chips within two years. However, analysts believe that although Broadcom Inc. currently holds about 70% of the market share in the custom AI chip market, over time, its share may be taken over by Marvell, and Broadcom Inc.'s market share may drop to around 50%. Specifically, Marvell has several advantages: Support of important clients: Marvell has won favor from important clients such as Amazon.com, Inc., possibly including Microsoft Corporation. Broadcom Inc., on the other hand, has alienated clients like Amazon.com, Inc. due to its tough negotiation strategy. Preferential treatment from cloud service providers: Analysts believe that the primary demand for custom AI chips will come from cloud service providers such as Amazon.com, Inc., Microsoft Corporation, and Alphabet Inc. Class C, where Marvell has a greater advantage. Greater growth potential: Due to its smaller scale, Marvell has more room for growth in the AI chip market expansion. It is estimated that by 2028, Marvell's annual revenue from AI chips could increase to over $20 billion, quadrupling the current revenue. Furthermore, Marvell's valuation is more attractive. NVIDIA Corporation will maintain its dominant position Although Broadcom Inc. and Marvell are rapidly developing in the field of custom AI chips, analysts believe that NVIDIA Corporation's dominant position in the overall AI chip market is difficult to shake in the short term. Chief analyst Kevin Krewell of technology research firm Tirias stated that compared to the AI chips developed by Broadcom Inc. and Marvell, NVIDIA Corporation's GPUs are more versatile and "user-friendly", supporting a wider range of workloads. Custom chips are still niche compared to NVIDIA Corporation's general-purpose chips. Furthermore, NVIDIA Corporation's technical expertise in the AI chip field and ecosystem building are far ahead of these competitors. This article is reprinted from "Wall Street News", author: Huang Wenwen; GMTEight editor: Xu Wenqiang.