Dave Vellante's Breaking Analysis: The AI Era Brings Giants and Unicorns

The AI Era Brings Giants and Unicorns

Nvidia and Broadcom are perhaps the two best-positioned companies to capitalize on the AI wave and dominate their markets for the better part of a decade. But what about the broader ecosystem? We believe that both firms will create more value together than in isolation.

Nvidia and the Expanding Breadth of AI

At Nvidia's GTC conference and Broadcom's investor day, the artificial intelligence (AI) platform shift was front and center. We attended both events this week and came away thinking that GTC24 was the most important event in the history of the technology industry.

We believe that GTC was more significant in terms of its reach, vision, ecosystem impact, and broad-based recognition that the AI era will permanently change the world. It surpassed Steve Jobs' iPod and iPhone launches in our opinion.

Meanwhile, Broadcom's first investor day since the company's acquisition of VMware underscored both the importance of the AI era and the highly differentiated strategies and paths that Nvidia and Broadcom are taking.

Nvidia and Broadcom: Two Different Paths to AI Dominance

Nvidia and Broadcom are taking dramatically different but overlapping strategies that may be headed for an eventual collision course.

Nvidia is an innovation powerhouse focused on chips, software, and AI platforms. The company is best known for its graphics processing units (GPUs) and has built an impressive ecosystem that leverages its assets to tie together powerful networks of customers, partners, and suppliers.

Broadcom is perhaps the most unique company in the technology business. It is a roll-up of durable franchises that chase markets on steep growth curves where the company can deliver a short-term return on investment (ROI). Broadcom focuses its R&D on serving customers in these markets with major engineering investments to achieve dominant positions in each of its target markets.

What Could Nvidia and Broadcom Have in Common?

Both companies are in the AI era, and both are taking very different paths to get there. Broadcom is perhaps the most unique company in the technology industry. It does not simply chase markets that are on steep growth curves and can deliver short-term ROI. Instead, it goes after established markets with durable franchises.

Broadcom's strategy can be described as unconventional, and it often catches waves by accident by design. We believe that Intel has a similarly differentiated approach compared to other semiconductor companies. Its strategy for success in the AI era revolves around consolidating market share in core franchises and pursuing emerging opportunities where the company can establish a first-mover advantage.

Collision Course?

In the AI era, semiconductor firms will compete for processor mindshare as developers seek to build the next AI application. Can Broadcom's semiconductor franchises, including its custom ASIC designs, steal share from Nvidia's GPUs? Or will Nvidia's software and AI platform dominance blunt Broadcom's advances? It will be an interesting space to watch.

The Trillion-Dollar Questions

What are the odds that Intel's and Broadcom's strategies succeed? Are there more viable alternative strategies for both companies in the AI era?

What About the Broader Ecosystem?

We believe that Nvidia and Broadcom are enablers of a broader ecosystem that collectively will create more value than either of these firms will in and of themselves. This is a new shake-up that we have not seen since the mainframe era and will create both giants and unicorns.

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