Broadcom Inc (NASDAQ:AVGO) may have delivered strong AI revenue growth that grabbed headlines, but a deeper look at how that growth is structured highlights a risk that’s less of a concern for Nvidia Corp (NASDAQ:NVDA) — concentration of demand and future margin pressures tied to its custom silicon business.
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Broadcom’s AI Revenue Growing Fast But With Margin Pressure
Broadcom’s AI-related revenue has been expanding rapidly. In its third-quarter earnings, the company reported roughly $6.5 billion in AI chip sales, up approximately 74% year over year, and forecast AI revenue could double to about $8.2 billion next quarter.
That growth is largely driven by custom AI accelerators and related silicon tailored to specific hyperscale customers, rather than by standardized products sold to a broad range of buyers. This bespoke model is fueling revenue momentum, but it also contributes to lower gross margins in the AI segment, a trend Broadcom has acknowledged and that analysts have cited as a drag on profitability.
Broadcom’s CFO said increased AI revenue — which carries lower margins relative to the company’s other products — is expected to reduce overall gross margins sequentially.
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Broadcom’s Customer Concentration Vs Nvidia’s Broader Adoption
Much of Broadcom’s AI pipeline is concentrated on a small group of hyperscale clients including Alphabet Inc (NASDAQ:GOOGL) (NASDAQ:GOOG), Meta Platforms Inc (NASDAQ:META), and other major cloud customers. Four major customers may generate roughly $10 billion in AI revenue beginning next fiscal year, and Broadcom’s CEO has highlighted a substantial AI order backlog tied to a few major buyers.
By contrast, Nvidia’s AI business is built around a standardized GPU platform (i.e., H100 and data center architectures) that serves a much broader base of enterprise and cloud customers, and its data center revenue accounts for the majority of total sales. Nvidia’s broader adoption across cloud service providers and enterprise clients is reflected in strong data-center growth and a dominant share of the GPU AI accelerator market.
Why It Matters
Broadcom’s AI growth is real and rapidly scaling, but its custom silicon model differs materially from Nvidia’s standardized GPU platform. Because a large share of Broadcom’s AI revenue depends on a few large customers and bespoke projects, the company faces higher execution and concentration risk, especially if any one deal slows or renegotiates.
Nvidia’s broader, standardized customer base spreads demand more widely — a dynamic Nvidia bulls tend to emphasize.
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