Two Promising AI Stocks Poised for Growth

The recent downturn in the stock market has opened doors for long-term investors, especially in the realm of artificial intelligence (AI) stocks. This includes opportunities not just in well-known companies like Nvidia but also in lesser-known AI semiconductor firms. Here, we will explore two promising AI chip stocks that could benefit investors in anticipation of the next AI market boom.

Advanced Micro Devices (AMD)

Advanced Micro Devices (AMD) has faced a significant decline, with shares dropping nearly 46% over the past year. Despite the downturn, the company is not underperforming. AMD has experienced impressive growth in AI-related sectors; its data center revenue surged 94% to reach $12.6 billion. Even though this growth showed some signs of slowing recently, it still increased by a robust 69% year over year, while total revenue boosted by 24%.

While AMD currently stands as the second-largest player in the graphics processing unit (GPU) market, the firm continues to benefit from rising AI infrastructure investments. Importantly, AMD’s chips are primarily utilized for inference tasks rather than training. This positioning could serve the company well in the future, as AI models evolve and underscore the need for rapid, real-time AI inference for applications such as cybersecurity, autonomous vehicles, and personalized shopping experiences. Furthermore, since AMD’s chips are generally more affordable than those of Nvidia, they may capture additional market share.

In the central processing unit (CPU) sector, AMD shines brightly. Although the market for data center CPUs is smaller than for GPUs, AMD has become a market leader, claiming over 50% market share among massive data center companies known as hyperscalers. The company also reported considerable CPU gains in personal computers (PCs), holding a 70% market share on major platforms like Amazon, Newegg, and MindFactory.

Though AMD acknowledges a slowdown in its gaming segment due to the absence of new gaming console releases, speculations about new Xbox and PlayStation models launching in the coming years could revitalize this area.

With a forward price-to-earnings ratio (P/E) of 22 based on 2025 analyst forecasts, AMD’s stock appears fairly priced considering its growth prospects and future opportunities.

Broadcom (AVGO)

Broadcom has also seen its shares fall, dropping roughly 32% in 2025. Nevertheless, the company is poised for significant growth potential, especially in the realm of custom AI chips, known as application-specific integrated circuits (ASICs). Although designing ASICs involves higher initial costs and time, these custom chips significantly outperform standard GPUs for specific tasks while using less power.

Broadcom received attention for its role in helping companies design custom chips. For example, Alphabet was the first to engage Broadcom for its Tensor Processing Units (TPUs), optimized for Google Cloud’s TensorFlow, its open-source machine learning framework. This collaboration has effectively improved performance and reduced energy costs associated with processing Google’s AI workloads.

As Broadcom attracts more clients for custom AI chip designs, including Apple, it estimates a serviceable market ranging from $60 billion to $90 billion for fiscal year 2026, which runs until October 2026. Although some revenue may still be directed to GPUs, this presents a significant growth opportunity for Broadcom.

Aside from custom chips, Broadcom contributes to AI infrastructure through its comprehensive array of networking technology components, including switches and network interface cards (NICs). As AI clusters become larger, these components are integral for managing data flow and facilitating network communication.

While Broadcom’s more conventional chip markets may weigh it down financially, the company is also expanding its software segment through its VMware division. This entity is accelerating growth by transitioning from traditional licensing to subscription models and enhancing the service offerings to its full VMware Cloud Foundation stack, crucial for virtualizing entire data centers.

With a forward P/E ratio of under 26, Broadcom stands out as an appealing investment option, bolstered by its potential in the custom AI chip market and robust growth initiatives.