Missed Out on Nvidia: 1 No-Brainer Artificial Intelligence (AI) Stock to Buy Before It Crushes the Market in 2025, and Beyond

Nvidia (NVDA 3.08%) is the top player in the market for data center graphics processing units (GPUs) that are being deployed in data centers for artificial intelligence (AI) training and inference, with some estimates putting the semiconductor giant's share of this market at 90%.

The good part is that Nvidia's dominant position in the AI chip market has allowed it to deliver remarkable growth to investors in the past couple of years, driven by the impressive growth in the company's revenue and earnings.

NVDA data by YCharts

But at the same time, this remarkable rally in Nvidia stock has made it expensive. Nvidia commands a price-to-sales ratio of 29, which is pretty high when we consider that the U.S. technology sector has a sales multiple of 8.2. The earnings multiple of 54 isn't cheap, either.

However, the pace at which Nvidia has been growing is the reason why it is deserving of rich valuation multiples. More importantly, the huge addressable opportunity that the company is sitting on indicates why it can keep justifying its valuation and deliver more upside in the future.

Nvidia isn't the only leading AI semiconductor stock that investors can buy right now. There is another dominant AI chip stock that's been clocking impressive growth of late and is relatively cheaper than Nvidia. This company recently released its quarterly results, and the stock soared.

Let's see why that was the case and check if this AI stock can continue crushing the market in 2025.

Broadcom's growth is picking up thanks to the healthy demand for custom AI chips

Broadcom (AVGO 1.13%) released its fiscal 2024 fourth-quarter results (for the quarter ended Nov. 3) on Dec. 12. The company's revenue shot up 51% year over year to $14 billion, while non-GAAP (generally accepted accounting principles) earnings increased by 28% to $1.42 per share. Consensus estimates were projecting Broadcom to deliver $1.39 per share in earnings, and its top line almost matched Wall Street's expectations.

Broadcom's organic revenue growth (excluding the revenue from the VMware acquisition completed in November 2023) came in at 9%. The company guided for $14.6 billion in revenue for the first quarter of fiscal 2025, which would be a 22% improvement over the same period last year. Additionally, the chipmaker is expecting adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to come in at 66% of revenue, which would be a nice increase over the year-ago period's reading of 60% of revenue.

AI is playing a key role in driving the solid acceleration in Broadcom's top- and bottom-line growth. The company finished fiscal 2024 with AI-related revenue of $12.2 billion, a huge improvement over the $3.8 billion generated from this segment in the previous fiscal year. The good part is that Broadcom is expecting its AI revenue to keep growing at a healthy rate in the current fiscal year as well.

The company forecasts a 65% year-over-year jump in AI-related revenue in the current quarter to $3.8 billion, accounting for 26% of its overall revenue. So, AI is now moving the needle significantly for Broadcom, and that trend is likely to continue thanks to the massive market that Broadcom sees for custom AI processors and networking chips.

Broadcom management said on the company's latest earnings conference call that it sees the serviceable addressable market for custom AI and networking chips to range of $60 billion to $90 billion by fiscal 2027. Even at the lower end, the addressable opportunity is five times the AI revenue that Broadcom generated last quarter.

The good part is that Broadcom is in a solid position to corner the lion's share of this addressable market, since it is the dominant player in the market for custom chips, formally known as application-specific integrated circuits (ASICs). The company reportedly controls between 55% and 60% of this space, according to JPMorgan. So, there is a solid chance that Broadcom's AI-specific revenue could increase at an incredible pace over the next three years.

Stronger earnings growth could lead to more upside

Analysts have rushed to increase their growth expectations from Broadcom following its latest report. This is evident from the chart.

AVGO Revenue Estimates for Current Fiscal Year data by YCharts

The company's revenue in the current fiscal year, which began last month, is expected to jump 19% from the previous year's reading of $51.5 billion. Additionally, its bottom line is expected to jump by 28% to $6.25 per share, which would be a big increase over the previous fiscal year's earnings growth of 15%.

However, there is a good chance that Broadcom may be able to clock faster growth than what analysts are expecting, considering the huge addressable opportunity, as well as its solid share of this market. That's why it won't be surprising to see Broadcom stock maintaining its red-hot rally in 2025 and beyond, as it is expected to maintain healthy double-digit growth rates over the next couple of fiscal years as well.

AVGO Revenue Estimates for Next Fiscal Year data by YCharts

All this makes Broadcom a top AI stock to buy right now, especially considering that it has a price/earnings-to-growth ratio (PEG ratio) of just 0.72, per Yahoo Finance (based on the expected earnings growth it is forecast to deliver over the next five years). That's slightly lower than Nvidia's PEG ratio of 0.82.

So, investors looking for an alternative to Nvidia should consider taking a closer look at Broadcom, as it has the potential to deliver more gains and is slightly cheaper when compared to the expected growth that it is expected to clock over the next five years.