Forget about Intel for a moment: there's a dividend-rich chip company that may provide a safer route to profit from the booming AI and cloud infrastructure market. This isn't Nvidia we're talking about; it's Broadcom, and it has emerged as one of the strongest performers during the current AI surge.
Since the Trump administration acquired a 10% stake in Intel (INTC) back in August 2025, the company's shares have surged impressively—over 70%—rising from $24 per share to approximately $43 as of now. In the current year alone, Intel's stock has registered a 15% increase. While the U.S. government investment certainly contributed to this rise, it wasn’t the only factor. Intel also received a significant $5 billion investment from Nvidia (NVDA), which enabled a partnership to develop chips intended for data centers and personal computers.
Additionally, Intel has stirred up excitement with its latest Panther Lake CPU chips, which are set to launch this month. The company has managed to reduce its losses in the foundry sector, leading investors to hope for a further turnaround in this area.
However, potential investors should be aware of some risks associated with Intel. The chipmaker recently reported underwhelming earnings for its fiscal fourth quarter. Despite exceeding earnings expectations, its revenue experienced a decline of 4% compared to the previous year. More troubling is the outlook for the first quarter, which fell short of analysts’ projections. Supply constraints are the primary issue here, hindering Intel's ability to meet demand. Consequently, the stock has experienced a steep drop, plummeting 22% from its recent high.
Furthermore, Intel has struggled with net losses for most of the past two years, only managing to return to profitability in the third quarter of 2024. This situation has resulted in a high valuation for the company, as its stock price has surged while net income remains relatively low. Given the intense competition in the industry and potential concerns from international clients regarding the U.S. government's involvement—even if it's minimal—investing in Intel could be viewed as somewhat risky.
Instead, savvy investors might want to consider Broadcom (AVGO) as a more reliable alternative in the AI landscape.
Broadcom has demonstrated impressive returns that rival Nvidia's performance. While Nvidia often grabs the headlines, Broadcom’s stock has delivered approximately 32% returns over the past year—outpacing Nvidia—and boasts a five-year annualized return of about 48%. Although this is less than Nvidia’s five-year annualized return of 68%, Broadcom certainly cannot be overlooked.
As a chip manufacturer, Broadcom doesn't compete directly with Nvidia. Instead, it specializes in a wide array of semiconductor chips designed to facilitate data transmission across vast networks, including broadband, telecommunications, mobile networks, hyperscalers, and data centers.
In its fastest-growing segments—the networking chips and AI-specific integrated circuits (ASICs) for hyperscale clients—Broadcom holds a dominant position, commanding a remarkable 70% to 80% market share in each category.
The company's revenues have been on a sharp upward trajectory, largely fueled by the AI sector. In the fourth quarter, revenue from AI-related chips soared about 74% year-over-year, comprising roughly one-third of Broadcom's total revenue. Looking ahead to the upcoming fiscal first quarter, Broadcom anticipates achieving record revenue of $19.1 billion, along with an expected doubling of AI chip revenue compared to the previous year.
The company's revenue growth over the next several quarters is supported by a substantial backlog of AI-related orders totaling $73 billion, which indicates that AI will increasingly contribute to Broadcom's overall revenue mix.
Moreover, a significant multi-year partnership with OpenAI, announced last October, aims to design and deploy 10 gigawatts of AI accelerators, enhancing the performance of AI applications. By 2030, Broadcom targets a staggering $90 billion to $120 billion in AI-related revenues, a substantial increase from around $20 billion in 2025. Achieving the upper end of this target would represent an impressive annual growth rate of about 43% over the next five years.
In simple terms, Broadcom is positioned right at the heart of the AI revolution, poised to reap substantial benefits as the leading player in this space for many years to come.
Of course, there are always concerns, such as the potential risk of having revenue concentrated among fewer clients compared to a company like Nvidia. However, many of these large hyperscale clients tend to have long-term contracts and are well-integrated into Broadcom’s ecosystem, which mitigates the risk considerably. Broadcom enjoys a robust competitive advantage due to its economies of scale, high switching costs, and advanced technological capabilities.
What further distinguishes Broadcom is its comparatively lower valuation. It currently trades at 33 times forward earnings, aligning with the Nasdaq 100 average. However, when examining the five-year price-to-earnings-to-growth (PEG) ratio of 0.9, it's clear that Broadcom represents a solid investment considering its projected growth over the next five years.
Additionally, Broadcom is one of the rare technology companies that pays dividends. Though the yield is modest at about 0.8%, the company has consistently increased its dividend for the past 15 years, making it a dependable source of income. Reinvesting these dividends could potentially enhance overall returns even further.
While Intel may be experiencing a positive streak, Broadcom stands out as one of the best long-term investments available today. For those seeking a sound investment strategy, choosing Broadcom seems like a no-brainer.
