Impact of Big Tech Custom AI Chips on AMD and Broadcom: Investment Thesis Analysis with Debt & Valuation Context

The growing trend of big tech companies developing in-house AI chips (e.g., Google’s TPU) creates divergent impacts on AMD and Broadcom, rooted in their distinct business models, debt profiles, and valuations.

• Broadcom (AVGO)
  is a leader in designing custom AI ASICs for hyperscalers like Google, Meta, and OpenAI, holding a ~70% share of the 2024 custom AI chip market [1]. This positions it as a direct beneficiary of the trend: Broadcom reported 220% YoY AI-related revenue growth in FY2024 [1], with Q4 2025 AI revenue guided to $6.2 billion [1]. A recent $10 billion custom chip order from OpenAI (September 2025) further validates its strong client relationships [2]. CEO Hock Tan projects a $60–$90 billion AI semiconductor total addressable market (TAM) by FY2027 [4].
• AMD (AMD)
  competes with Nvidia in supplying GPUs (Instinct series) for AI applications. While it secured a partnership with OpenAI (October 2025) [12], it faces pressure from big tech’s in-house chips, which could reduce demand for third-party GPUs [12]. Susquehanna projects AMD’s AI market share to remain modest (~4% by 2030) [4], though it achieved 57% YoY revenue growth in the data center segment in Q1 2025 [11].
  Debt profiles contrast sharply: AMD holds ~$4 billion in net cash (Q3 2025: $7.2 billion in cash/short-term investments, $3.2 billion in total debt) [7][8], while Broadcom carries ~$48.3 billion in net debt (2024) [3]. Valuations reflect growth expectations: AMD trades at ~112.5x TTM P/E, compared to Broadcom’s ~72.9x [0].

1. Broadcom’s investment thesis is strengthened
   by its alignment with the custom AI chip trend. Its dominant ASIC position drives high-margin revenue growth, mitigating concerns about its significant net debt through robust free cash flow (FY2025 FCF: $26.9 billion) [0].
2. AMD’s investment thesis faces mixed risks
   from in-house chip competition, but its net cash position provides financial flexibility. Its high P/E ratio relies on delivering sustained AI GPU market share gains amid competition from both big tech’s internal chips and Nvidia’s ~80% market lead [4].
3. Divergent strategies determine exposure
   : Broadcom’s focus on custom ASICs makes it a direct beneficiary of the trend, while AMD’s GPU-centric model exposes it to potential demand displacement.

• Opportunities
  :
  • Broadcom’s leadership in custom AI chips positions it for continued revenue growth within the expanding AI TAM.
  • AMD can leverage partnerships (like OpenAI) to expand its GPU market share in data centers.
• Risks
  :
  • Execution risk (yield issues, design errors) for both companies in delivering high-performance AI chips [1].
  • AMD faces regulatory risks from export controls on advanced chips to China [9].
  • Broadcom’s high net debt requires stable cash flow to service obligations, though its FCF is currently strong [0].
  • Nvidia’s market dominance limits AMD’s AI GPU growth potential [4].

• Market cap: AMD ($348.79 billion), Broadcom ($1.65 trillion) [0]
• Current prices: AMD ($214.90), Broadcom ($349.32) [0]
• Broadcom’s FY2024 AI revenue growth: 220% YoY [1]
• AMD’s Q1 2025 data center revenue growth: 57% YoY [11]
• This analysis provides market context and risk/opportunity assessment without prescriptive investment recommendations.