To The Moon

Recent developments, particularly $Broadcom(AVGO)$'s strong earnings report and its new custom AI chip deal with OpenAI, have shifted investor attention and raised questions about whether it poses a significant threat to $NVIDIA(NVDA)$'s market dominance.

While Broadcom's recent performance has been impressive, a deeper analysis reveals that these two companies are not in a zero-sum competition. Instead, they operate in distinct but complementary parts of the AI ecosystem, making them both viable long-term investments.

This is the very reason why I have these two names in my long-term portfolio, only to increase more weightage for one when opportunities appear.

In this article I would like to share why investors should not shift focus entirely from Nvidia to Broadcom, but rather to consider having both in their portfolio. And also I would be sharing how we can look at the barbell strategy to do that.

Analysis: Should Investors Shift Focus or Hold Both?

Nvidia's Position:

Nvidia remains the undisputed leader in the AI accelerator market, primarily through its powerful general-purpose GPUs and its comprehensive CUDA software ecosystem. This ecosystem is a key competitive moat, as it has a vast and loyal developer base, making it difficult for customers to switch to a different platform. Nvidia's business model is a high-growth, high-margin one, with a focus on raw performance and a vertically integrated stack that includes hardware, software, and systems.

Broadcom's Position:

Broadcom's strategy is different but equally powerful. Instead of competing head-to-head with Nvidia's GPUs, Broadcom focuses on two key areas:

Custom AI Chips (ASICs): Broadcom designs and manufactures application-specific integrated circuits (ASICs) for major hyperscalers like Google and Meta. These chips, often called XPUs, are tailored for specific workloads and can offer significant performance and power efficiency advantages for companies with a massive scale. The recent deal with OpenAI underscores this trend.

Networking and Connectivity: Broadcom is a dominant player in the networking and connectivity infrastructure that links thousands of AI chips together in massive data centers. Its Tomahawk and Jericho families of Ethernet switches are critical components that enable the scale-out of AI systems. Nvidia itself is a customer of Broadcom for some of its networking technologies.

The "Not a Zero-Sum Game" Conclusion:

The recent market reaction, where Broadcom's stock surged while Nvidia's dipped, was an oversimplification of the competitive landscape. As industry analysts have pointed out, both companies can and are likely to continue to thrive.

The AI market is growing so rapidly that there is ample room for multiple winners. Nvidia's dominance in general-purpose AI compute is a testament to its innovation and ecosystem, while Broadcom's leadership in custom silicon and networking makes it an indispensable partner for the very same companies that are Nvidia's largest customers.

Therefore, for most investors, the prudent approach is not to shift focus entirely from Nvidia to Broadcom, but rather to consider having both in their portfolio.

Applying a Barbell Strategy for AVGO and NVDA

The barbell strategy, famously popularized by Nassim Nicholas Taleb, involves having a portfolio with two extremes: a large, low-risk, conservative portion, and a small, high-risk, speculative portion, with little to nothing in the middle.

When applied to Broadcom and Nvidia, this strategy can be structured as follows:

The "Conservative" Barbell (Broadcom - AVGO):

Broadcom represents the more stable, mature, and diversified side of the barbell.

Investment Thesis: Broadcom's business model is built on a diversified portfolio of high-margin products, including its core semiconductor business and its robust infrastructure software segment (strengthened by the VMware acquisition). It offers steady growth, strong cash flow, and an attractive dividend. The company's strategic focus on custom chips and networking provides a durable, long-term runway in the AI space.

Role in Portfolio: This portion of the portfolio provides a measure of stability and consistent returns, with significant exposure to the AI theme without the same level of volatility as a pure-play AI accelerator company.

The "High-Growth" Barbell (Nvidia - NVDA):

Nvidia represents the high-risk, high-reward, hypergrowth side of the barbell.

Investment Thesis: Nvidia is the pioneer and dominant leader in the foundational technology of AI. Its GPUs and CUDA platform are critical for large-scale AI training and inference. While its valuation is high, its growth trajectory and a near-monopoly in its core market justify the premium for investors seeking explosive growth.

Role in Portfolio: This portion is for aggressive investors who want maximum exposure to the AI boom. It provides the potential for outsized returns but comes with a higher degree of risk, including competitive threats and potential market corrections.

How to Execute the Strategy:

An investor could allocate a larger portion of their capital to Broadcom (e.g., 60-70%) for stability and income, and a smaller, more aggressive portion to Nvidia (e.g., 30-40%) for growth.

This combination allows for participation in the full scope of the AI revolution—from the foundational hardware to the enabling infrastructure—while balancing risk and reward. It acknowledges that both companies are "winners" in their respective domains and that the broader market growth is large enough to support both.

How They Sit on the Barbell

• Nvidia (NVDA) – Aggressive Growth Tip

  Pure play on AI, GPUs, datacenter growth.

  High volatility, expensive valuation, but outsized upside.

  Momentum-driven stock, sensitive to sentiment and earnings surprises.

• Broadcom (AVGO) – Stability Tip

  Diversified semiconductor + infrastructure software (after VMware deal).

  Steady free cash flow, strong dividend (~2%), recurring revenues.

  Slower growth than NVDA but more predictable.

So in a tech-only barbell, Nvidia = “high-octane growth,” Broadcom = “defensive compounder.”

Example Allocations

Here are three ways we could structure it depending on risk appetite:

1. Aggressive Tilt (growth-seeker):

   65% NVDA

   35% AVGO

2. Balanced (equal barbell):

   50% NVDA

   50% AVGO

3. Defensive Tilt (income & stability):

   40% NVDA

   60% AVGO

Rebalancing Rule of Thumb

• Quarterly or semiannual rebalance — lock in gains from the hotter side (likely NVDA in strong AI cycles) and rotate into the steadier Broadcom.

• This way, you avoid chasing momentum endlessly while maintaining discipline.

Enhancement Option

If we want to “fill out” the barbell within just these two:

• NVDA = call option on explosive AI upside

• AVGO = bond proxy within tech (steady dividends, predictable cash flows)

That gives you a barbell inside one sector — balancing hypergrowth against durable compounding.

Five-Year Performance Snapshot: NVDA, AVGO, and S&P 500

Here’s what the web data reveals over the past five years:

S&P 500 5 Year Return is at 84.56%, compared to 93.80% last month and 93.01% last year. This is higher than the long term average of 47.72%. The S&P 500 has delivered an average annual return of 10.33% since 1957, but when adjusted for inflation, the real return drops to 6.47%.

Interpreting the Numbers

• Nvidia (NVDA) has delivered extraordinary growth, especially driven by AI expansion, achieving roughly a 77% compounded annual growth rate over the last five years. (source: PortfoliosLab)

• Broadcom (AVGO), with its blend of semiconductors, infrastructure software, and AI custom chips, has returned an eye-opening ~954% total, which translates to an approximate 60.6% CAGR. (source: Finance Charts)

By comparison, the S&P 500’s 5-year annualized return typically ranges in the 10–15% ballpark, so both NVDA and AVGO have significantly outperformed the index.

What This Means for Your Tech-Centric Barbell

Using the two extremes—NVDA's hypergrowth versus AVGO’s dividend-support—with various weightings:

A balanced 50/50 barbell would average their returns, potentially delivering a compound return near 68–70% CAGR—a middle ground between NVDA’s ~77% and AVGO’s ~61%.

Tilting aggressively toward NVDA (65/35) may edge you closer to Nvidia’s returns, but with added volatility linked to AI cycles.

A defensive tilt (40/60 NVDA/AVGO) leans into steadier income with a lower—but still very solid—growth path.

Summary

Investors may benefit from holding both Nvidia and Broadcom in their portfolios, as the two companies are not in a zero-sum competition. While Nvidia dominates the high-growth, general-purpose AI chip market with its powerful GPUs and robust CUDA software ecosystem, Broadcom is a leader in custom AI chips (ASICs) and the critical networking infrastructure that connects vast data centers. The AI market is expanding so rapidly that there is ample room for both companies to thrive in their respective niches.

A barbell strategy works well here by balancing risk and reward. Nvidia represents the high-risk, high-reward side, offering explosive growth potential but also high volatility and valuation risk. Broadcom, with its more diversified business, consistent cash flow, and strong dividend, forms the conservative, stable side of the barbell. This approach allows investors to capture the full spectrum of the AI revolution while protecting their portfolio from the extreme volatility of a single, highly-focused stock.

Appreciate if you could share your thoughts in the comment section whether you think adopting a barbell strategy for AVGO and NVDA would allow us to balance the risk and reward, and can capture the full spectrum of the AI revolution while protecting our portfolio from the extreme volatility.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.