AMD vs Broadcom: Which AI Chip is Better to Buy After the Selloff?

What Happened to AI Chip Stocks?

The AI chip trade has hit a rough patch. The PHLX Semiconductor Index recently entered bear market territory, falling more than 20% from its June peak and two of the sector's most closely watched names have been caught in the downdraft. Advanced Micro Devices (AMD) now trades approximately 15% below its high, while Broadcom (AVGO) has fallen around 25% from its own peak.

Yet both companies are delivering some of the strongest financial results in their histories. Falling stock prices and accelerating businesses make for a good time to compare the two. Here is what UK investors need to know about AMD and Broadcom and what the numbers say about each. You can gain exposure to both companies through XTB's shares platform or track the broader semiconductor sector through ETFs.

Company Overviews

Advanced Micro Devices (AMD)

AMD is a US semiconductor company that designs CPUs and GPUs for consumer, enterprise, and data centre markets. Its MI series of AI accelerators competing directly with Nvidia's dominant GPU line — has positioned it as the most credible challenger in the AI chip space. AMD trades on the NASDAQ under the ticker AMD.

Broadcom (AVGO)

Broadcom is a global technology firm operating across two segments: semiconductor solutions and infrastructure software. Its semiconductor business includes custom AI accelerators (known as XPUs) built for the world's largest cloud companies. Broadcom has pursued a differentiated path through custom chips, winning top-tier customers including Anthropic, Google, Meta, and OpenAI. Broadcom also trades on the NASDAQ under the ticker AVGO.

Financial Comparison: AMD vs Broadcom

Revenue Growth

Broadcom's fiscal second quarter revenue climbed 48% year over year to $22.2 billion, with AI semiconductor revenue — the custom accelerators and networking chips it builds for cloud giants — soaring 143% to $10.8 billion. AMD's data centre revenue rose 57% year over year in the first quarter, with guidance implying faster growth ahead. However, Broadcom's guidance calls for 84% revenue growth this quarter against the roughly 46% AMD's outlook implies — giving Broadcom the near-term growth edge.

Cash Flow and Dividends

This is where the gap between the two companies becomes most apparent. Broadcom generated about four times AMD's quarterly free cash flow, and it pays a dividend while AMD does not. Broadcom's adjusted net income came in at $12.1 billion, with free cash flow of $10.3 billion — a staggering 46% of revenue. Broadcom currently pays a quarterly dividend of $0.65 per share, yielding approximately 0.68% at the current stock price.

Valuation

At approximately $370 per share, Broadcom trades at roughly 32 times this year's expected earnings and about 19 times next year's — roughly half of AMD's multiple on both counts. In other words, Broadcom is currently the cheaper stock on a forward earnings basis despite delivering stronger revenue growth and significantly higher cash generation.

Prices as of late July 2026. For informational purposes only.

The AI Opportunity: Different Strategies

AMD: The GPU Challenger

AMD is competing head-on with Nvidia in the market for general-purpose AI accelerators — GPUs used for training and running AI models. Its MI450 GPU is the primary challenger to Nvidia's dominant chips. AMD is the purer bet on gaining share in AI accelerators — if the MI450 ramp exceeds forecasts, earnings estimates could race higher and make today's multiple look conservative. For investors who want to understand how to evaluate individual stocks like AMD, our guide to what a P/E ratio is and how to use it provides useful context.

Broadcom: The Custom Silicon Specialist

Broadcom's approach is different. Rather than competing with Nvidia on general-purpose GPUs, it builds custom AI chips (XPUs) tailored specifically to the needs of individual hyperscalers. Broadcom has confirmed gigawatt commitments from OpenAI, Anthropic, Meta, and Google for its custom silicon. CEO Hock Tan called AI XPU and networking demand "simply insatiable" and told investors 2027 AI revenue will "very easily" exceed $100 billion. Q3 guidance calls for $29.4 billion in revenue and $16 billion in AI silicon, up over 200% year over year. Broadcom also recently announced a renewed chip supply agreement with Apple through 2031, exceeding $30 billion in chips — providing additional long-term revenue visibility outside the hyperscaler AI market.

What Analysts Are Saying

According to 26 analysts, Broadcom has a Buy consensus rating as of July 25 2026, with an average analyst price target of $501.58. Morgan Stanley has reaffirmed its Buy rating on Broadcom, calling it a "core AI winner." Some analysts cite upside potential to $600. On AMD, analyst sentiment is also broadly positive, with the stock viewed as the most credible alternative to Nvidia in the AI accelerator market. However the nearer-term growth and cash flow metrics continue to favour Broadcom in most comparative analyses.

Key Risks to Watch

AMD risks:

• Continued Nvidia dominance in GPU market share
• MI450 ramp slower than expected
• Higher valuation leaves less room for disappointment
• No dividend provides no income cushion during market volatility

Broadcom risks:

• Customer concentration — a significant portion of AI revenue is tied to a small number of hyperscalers
• Bull case weakens if hyperscaler AI capex commentary softens or gross margins slip below 73%
• Stock down approximately 25% from highs — recovery timeline uncertain
• Complex business structure spanning semiconductors and enterprise software

How UK Investors Can Gain Exposure

Direct share investing — buy AMD or AVGO shares directly through XTB's shares platform. Note that as US-listed stocks, UK investors are subject to withholding tax on any dividends received from Broadcom.

CFDs — trade AMD or AVGO price movements without owning the underlying shares using CFDs. CFDs offer leverage and the ability to go short — useful if you want to hedge existing exposure or trade short-term price moves around earnings. Read our guide to stock CFDs vs buying shares to understand the differences between the two approaches.

ETFs — gain broader semiconductor sector exposure through ETFs tracking the Philadelphia Semiconductor Index or NASDAQ 100, both of which include AMD and Broadcom as significant holdings.

Investment Plans — for long-term investors wanting structured exposure to the AI and technology theme, XTB Investment Plans allow you to invest in a curated basket of ETFs aligned to specific sectors and themes.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

This article is for informational and educational purposes only and does not constitute financial advice or a personal recommendation to buy or sell any investment. The value of investments can go down as well as up and you may get back less than you invested. Past performance is not a reliable indicator of future results. Always consider your individual circumstances and if in doubt, seek independent financial advice.