Worried about Nvidia's stock? This analyst has a $2 trillion reason to remain calm.

By Britney Nguyen

The market for AI compute and networking could reach $2 trillion by 2030, and both Nvidia's GPUs and Broadcom's custom chips can win, Melius analysts say

Nvidia and Broadcom can both win as the market for AI compute and networking reaches $2 trillion, Melius analysts say.

Broadcom Inc.'s momentum in its custom-chip business has made some Nvidia Corp. investors nervous about emerging competition. But one analyst sees room for both chip companies to win as the market for artificial-intelligence compute and networking grows.

Broadcom (AVGO) said during its third-quarter earnings call that it has a new customer for its custom silicon that is expected to add $10 billion in revenue next year. That gives the company four customers that are scaling custom AI chip deployments in the next twelve months, and some analysts said that could translate to Broadcom's AI chip revenue growing by 100% over the next two years. Nvidia's stock (NVDA) fell almost 3% on Friday in the aftermath, though it rebounded nearly 1% on Monday.

See more: Broadcom is starting to look 'eerily reminiscent' of Nvidia. Both stocks are feeling the impact.

Melius analysts led by Ben Reitzes said in a Monday note that they "have always taken a view that Nvidia's share of AI compute," or processing power and computational resources, "would actually fall over time" as custom-chip designers like Broadcom worked toward a roughly 30% share of the market. Broadcom makes application-specific integrated circuits, or ASICs, which are custom-built chips for specific AI applications. Nvidia makes graphics processing units.

However, there should be plenty of opportunity to go around, according to the Melius team, which sees the market for AI compute and networking potentially growing to $2 trillion annually by the end of the decade. In the analysts' view, both companies can win.

Reitzes compared Nvidia to Apple Inc. (AAPL) for its "cadre of loyal developers that use its fully programmable architecture to make real money from AI," referring to Nvidia's Compute Unified Device Architecture, or CUDA, ecosystem. The system, which allows developers to use GPUs for general-purpose computing, has helped Nvidia "sustain the vast majority of industry profits," much as Apple has in the mobile-phone market, in the analysts' view.

"Apple's stock worked long-term (and then some) even as its unit share fell to under 25% globally in touchscreen smartphones," the analysts said.

The Melius analysts said that if Broadcom can reach 20% of the $2 trillion serviceable addressable market they are projecting for 2030, both its stock and Nvidia's "are going a heck of a lot higher," even if Nvidia's market share falls to 40%.

Nvidia's current run rate in the second half of the year reflects its position of more than 70% of the serviceable addressable market for AI, networking and compute, the analysts said, which should surpass $300 billion this year.

Nvidia Chief Executive Jensen Huang "must see something in his upcoming orders that is really good," the analysts said, after the company's capital expenditures figures for the second quarter of the calendar year "were higher than expected and forecasted to go higher too."

Meanwhile, OpenAI, which analysts expect is Broadcom's undisclosed fourth customer, recently told investors it expects to spend $115 billion through 2029, which far exceeds the $35 billion it had previously modeled.

To the Melius team, that signals OpenAI "intends to raise - and spend a lot more money on compute and networking from many sources."

But analysts at Citi Research are feeling slightly less bullish than before, cutting their Nvidia price target to $200 from $210 on the increased competition, which they think stems from efforts at Alphabet Inc. (GOOGL) (GOOG) to offer computing capacity to its rivals.

-Britney Nguyen

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09-08-25 1858ET