AMD vs. Broadcom: The Better AI-Chip Stock to Buy After the Sell-Off
A brutal week for chip stocks ended with the PHLX Semiconductor Index in a bear market, down more than 20% from its June peak. Two of the AI trade's flagship names went down with it. Advanced Micro Devices (AMD) now trades about 15% below its high, while Broadcom (AVGO) h…
Intelligence analysis by Llama
The article compares AMD and Broadcom, two AI chip stocks that have fallen after a brutal week for chip stocks. AMD has accelerated its business, with revenue rising 38% year over year to $10.3 billion, while Broadcom's AI semiconductor revenue soared 143% to $10.8 billion. The article concludes that Broadcom is the better buy right now due to its faster growth, cheaper stock, and str…
Imagine you have two friends who are both good at making AI chips. One friend, AMD, is really good at making chips for computers, but they're expensive. The other friend, Broadcom, is also good at making chips, but they're cheaper and make more money. Which friend would you rather invest in? Broadcom is the better choice because they're growing faster and making more money.
Analysis
A Brutal Week for Chip Stocks Ends with a Bear Market
A brutal week for chip stocks ended with the PHLX Semiconductor Index in a bear market, down more than 20% from its June peak. Two of the AI trade's flagship names went down with it. Advanced Micro Devices (AMD) now trades about 15% below its high, while Broadcom (AVGO) has fallen about 25% from its own. Both companies, meanwhile, are executing about as well as they ever have. Falling stock prices and accelerating businesses make for a good time to compare the two.
AMD: Accelerating, and Priced Like It
AMD's first-quarter results showed a company hitting its stride. Revenue rose 38% year over year to $10.3 billion, led by the data center segment, where revenue climbed 57% to $5.8 billion on strong demand for its EPYC server processors and the continuing ramp of its Instinct AI accelerators. Non-GAAP (adjusted) earnings per share rose 43% to $1.37, and free cash flow hit a quarterly record of $2.6 billion. Even the client business, which sells chips for personal computers, grew 26%. Profitability is moving the right way, too, with the company's adjusted gross margin expanding to 55% from 54% a year earlier. And the growth is speeding up. Management guided for second-quarter revenue of about $11.2 billion, implying roughly 46% year-over-year growth -- up from 38% in Q1. CEO Lisa Su said customer engagement around the company's upcoming MI450 series accelerators and Helios rack systems is strengthening, with forecasts from leading customers exceeding AMD's initial expectations.
Broadcom: Faster Growth, Cheaper Stock
Broadcom's fiscal second quarter (the period ended May 3, 2026) was arguably even stronger. Revenue climbed 48% year over year to $22.2 billion. The star was AI semiconductor revenue (the custom AI accelerators and networking chips it builds for cloud giants), which soared 143% to $10.8 billion. Adjusted net income came in at $12.1 billion, and free cash flow was $10.3 billion, a staggering 46% of revenue. Additionally, Broadcom pays a quarterly dividend of $0.65 per share, yielding about 0.7% at the stock's current price. AMD offers no comparable income stream. The outlook is even better. "The momentum continues and in Q3 we expect semiconductor revenue from AI to grow over 200 percent year-over-year to $16.0 billion," said CEO Hock Tan in the company's fiscal second-quarter earnings release. Total revenue guidance calls for about $29.4 billion, up 84% year over year.
The Better Buy Right Now
On growth, Broadcom currently has the edge, with guidance calling for 84% revenue growth this quarter against the roughly 46% AMD's outlook implies. On cash, it isn't close. Broadcom generated about four times AMD's quarterly free cash flow, and it pays a dividend while AMD does not. And on price, Broadcom trades at about half AMD's multiple of expected earnings. Of course, AMD is the purer bet on gaining share in AI accelerators. If the MI450 ramp exceeds forecasts next year, earnings estimates could race higher and make today's multiple look conservative. For investors who want maximum upside to that scenario, AMD is the more explosive stock -- in both directions. But when the faster-growing business is also the cheaper stock and the stronger cash generator, the decision isn't difficult. I'd buy Broadcom over AMD after this sell-off.
Key points
- AMD's first-quarter results showed a company hitting its stride, with revenue rising 38% year over year to $10.3 billion.
- Broadcom's fiscal second quarter was arguably even stronger, with revenue climbing 48% year over year to $22.2 billion.
- Broadcom's AI semiconductor revenue soared 143% to $10.8 billion, while AMD's revenue rose 38% year over year to $10.3 billion.
- Broadcom pays a quarterly dividend of $0.65 per share, yielding about 0.7% at the stock's current price, while AMD offers no comparable income stream.
If Broadcom's guidance is accurate, the company could see significant growth in the coming quarters, with AI semiconductor revenue expected to grow over 200% year-over-year. This could lead to increased earnings and a higher stock price.
If Broadcom's growth slows down or the company fails to meet its guidance, the stock price could decline, and investors could lose money.
