AMD struggles as Broadcom secures massive AI chip order

In early September 2025, the semiconductor industry faced significant developments that concerned market participants. AMD, an American multinational semiconductor company, experienced a decline in its stock value exceeding 6% after Broadcom, another key player in the sector, announced its quarterly results. Broadcom disclosed impressive figures, revealing a $10 billion order for custom AI chips from a new client, widely suspected to be OpenAI. This revelation triggered a surge in Broadcom's stock price, increasing by nearly 11%, raising alarms about AMD's competitive standing in the evolving AI hardware landscape. The announcement from Broadcom was particularly notable given the growing interest in custom silicon for AI applications. The company reported a remarkable 63% year-over-year hike in AI revenue for Q3, totaling $5.2 billion. Meanwhile, Nvidia, known for its robust presence in the graphics processing unit (GPU) market, saw its stock drop about 3% in reaction to Broadcom's news. Nvidia has been recognized for its dominance in training workloads and an extensive software ecosystem, which offered investors some reassurance, unlike AMD, who is perceived to lack substantial customer validation for its products at scale. The AI hardware market is perceived to be potentially changing, shifting from a focus on training AI models, which is resource-intensive and upfront, to inference, where models are deployed and used more consistently in practical applications. Broadcom’s custom chip architecture, known as XPUs, reportedly captures the growing needs of hyperscale customers, signaling a possible advantage as they increasingly seek efficient solutions. AMD, who faces increasing competitive pressure from not only Broadcom but also from Nvidia, seems to find itself in a precarious middle position as it competes against these stronger players on both ends of the market. Despite these challenges, AMD's stock valuation remains relatively high, trading at around 40 times its anticipated 2025 earnings. By comparison, Broadcom commands an even steeper forward earnings valuation at approximately 49 times, which is interesting given that its projected revenue growth is projected to slow down to about 23% for the year. Following Broadcom’s strategic movements, it appears the company is bolstered by stronger profitability potential and offerings through its significant AI hardware revenue growth. Investors and analysts will closely watch how AMD adapts to maintain its position amidst the rapidly evolving competitive landscape as AI technology continues to advance.