Advanced Micro Devices (NASDAQ: AMD) has had a great year, rising more than 120% so far. However, it has gotten a bit hot. AMD’s valuation has soared, and it doesn’t quite have the same catalysts coming up in 2027 as another top AI hardware stock: Broadcom (NASDAQ: AVGO).

Broadcom is a much better deal in my opinion, and will lead it to new heights over the next year and vastly outperform AMD over the coming year.

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AMD has clear exposure to the AI build-out via its data center division, which supplies GPUs and other computing components to those in the space. This part of AMD’s business is doing great and saw 107% year-over-year growth to $6.7 billion in the second quarter. However, it has nothing on Broadcom.

Broadcom does a lot of different things as a company, but what investors are most focused on is its custom AI chips. While AMD makes GPUs, which are great for all sorts of workload types, some of that capability gets wasted when the device is only used to process one type of workload during its service life.

To cut costs, AI hyperscalers are starting to partner with companies that have computing unit design expertise, and Broadcom is one of them. Broadcom and its clients collaborate and design a computing chip tailored around the workload it will see, which can result in higher performance at a lower cost. With AI hyperscalers looking to maximize computing power for every dollar they spend, this is a no-brainer decision.

While there will always be the need for general-purpose GPUs, custom AI chips are starting to become more popular, and I suspect this trend will persist throughout the rest of the AI buildout. This trend is already becoming apparent in Broadcom’s results, and it could easily propel its stock to outperform AMD over the next few years.

During its fiscal 2027’s third quarter (ended August 2), AI semiconductor revenue totaled $16.7 billion, growing at a 221% year over year pace. That’s an incredible growth rate, and it makes Broadcom’s AI division nearly three times as large as AMD’s and growing at a faster pace. But it’s not done there either.

Broadcom has long projected next year’s AI semiconductor revenue to total $100 billion, but it increased its guidance to $115 billion during this quarter. In 2028, they expect to double again to $230 billion. That’s an incredible outlook, and that business will make AMD’s look like a drop of water in a bucket.