Nvidia defends its dominance in the artificial intelligence space with its software moat. Many companies have built their AI software stacks based on Nvidia CUDA to harness the power of GPUs, and because Nvidia’s software only works with its GPUs, they can’t switch to competitors’ GPUs.
This strategy has worked well for the company; however, things are changing, and Broadcom just took a slice of Nvidia’s AI pie.
Broadcom’s increase in AI market share can only surprise people who don’t know that it already has a long-standing partnership with Google, which birthed its tensor processing units (chips specialized for AI work).
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The company also works with Meta Platforms and ByteDance on their custom AI chips. During the earnings call, Broadcom announced a partnership with another major AI company.
On September 4, Broadcom (AVGO) reported its results for Q3 of fiscal 2025.
Hock Tan, president and CEO of Broadcom, expects AI semiconductor revenue to grow to $6.2 billion in the next quarter.
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Revenue of $15.95 billion for the third quarter, up 22% YoY.
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Net income of $4.14 billion for the third quarter.
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Adjusted EBITDA of $10.7 billion for the third quarter, or 67% of revenue.
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Diluted earnings per share of $0.85 for the third quarter;
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Quarterly common stock dividend of $0.59 per share.
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Revenue guidance of approximately $17.4 billion, an increase of 24% YoY.
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Adjusted EBITDA guidance of 67% of projected revenue.
During the earnings call, Tan said that the company made a deal with a new customer to build their AI accelerators, and the customer committed to over $10 billion in orders of AI racks based on the company’s XPUs.
Broadcom didn’t reveal who the new customer is, but Financial Times’ contacts confirmed that OpenAI is the new client.
With OpenAI joining Google, Meta, and ByteDance in search of cheaper AI chips, it is clear that most companies would switch from Nvidia to something else if it weren’t for CUDA. Nevertheless, since they are investing in these chips, they must also slowly make changes to their software stacks.
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Another piece of tech that helps Nvidia dominate the market is NVlink. It helps connect multiple GPUs and communicate at very high speeds. Many companies have teamed up to work on an alternative called Ultra Accelerator Link, including Google, AMD, Intel, Meta, Apple, Hewlett Packard Enterprise, Microsoft, Broadcom, and many more.
