Key Takeaways:
Nvidia Corp. and Broadcom Inc., the two largest US semiconductor companies by market value, each fell during the first half of 2026 as investor focus broadened beyond pure AI chip plays — but product roadmaps, earnings momentum and rising hyperscaler capital expenditure point to a potential second-half recovery.
"Semiconductor stocks have repriced as the market questions whether AI infrastructure spending is translating into commercial returns, but the CapEx cycle is still accelerating," said Rachel Kim, semiconductor supply chain analyst at Edgen. "Nvidia at 21.7 times forward earnings is near the S&P 500 average, which is historically cheap for this company."
Nvidia shares returned 4.98% year-to-date through June 30, trailing the broader semiconductor sector. The iShares PHLX Semiconductor Sector Index ETF (SOXX) gained 59% over the same period, while Advanced Micro Devices Inc. more than doubled. Broadcom fared better among the AI giants, returning 8.43% YTD, but still lagged the sector benchmark. The divergence reflects a rotation away from the most crowded AI names into laggards that began 2026 at lower valuations, according to data from PortfoliosLab.
The case for a second-half rebound rests on three pillars: product cycles, valuation and capital expenditure. Nvidia's forward price-to-earnings multiple of 21.7 times is well below its five-year average of 72 times, according to Goldman Sachs, which called the valuation "compelling" in a July 7 note. The firm also reaffirmed that its Kyber NVL144 rack-scale platform remains on schedule after denying reports of a delay to 2028. Broadcom, trading at 62 times trailing earnings with a market capitalization of $1.78 trillion, has a more expensive multiple but offers diversification through its networking and infrastructure software businesses.
Hyperscaler CapEx Provides the Demand Backdrop
The primary demand driver for both companies — cloud provider investment in AI infrastructure — shows no signs of slowing. Hyperscaler AI capital expenditure is projected to rise to $650 billion in 2026 and reach $1 trillion in 2027, according to Goldman Sachs estimates. Microsoft Corp., Alphabet Inc., Meta Platforms Inc. and Amazon.com Inc. are all increasing their spending on Nvidia's graphics processing units and Broadcom's custom AI accelerators and networking silicon.
Nvidia reported revenue of $253.5 billion over the trailing twelve months, with net income of $192.8 billion and gross margins of 74.9%. The company's data center segment, which accounts for the vast majority of revenue, continues to benefit from the shift toward AI inference workloads as deployed models scale. Broadcom posted $75.5 billion in trailing revenue with net income of $42 billion and gross margins of 67.2%, supported by its VMware acquisition and custom chip programs for hyperscale customers.
Risk-Adjusted Performance and Drawdown History
Over the past decade, Nvidia has delivered an annualized return of 65.79%, far outpacing Broadcom's 40.97%. But the higher return came with greater volatility. Nvidia's maximum drawdown since 2009 reached 89.72%, compared with Broadcom's 48.30%. On a risk-adjusted basis over the trailing 12 months, Broadcom holds a slight edge with a Sharpe ratio of 0.80 versus Nvidia's 0.65, according to PortfoliosLab data.
The correlation between the two stocks stands at 0.53 over the past year and 0.56 over the full available history, meaning they provide meaningful diversification when held together. Nvidia's one-month volatility of 11.57% is roughly half Broadcom's 20.87%, though over longer periods the gap narrows — Nvidia's five-year annualized volatility of 51.82% actually exceeds Broadcom's 43.71%.
What to Watch in the Second Half
Nvidia's next earnings report, for the second quarter of fiscal 2027, is scheduled for Aug. 26. The results from Microsoft and Alphabet on July 29, followed by Amazon in early August, will provide the first read on whether cloud spending commitments remain intact. Broadcom reports on a different fiscal calendar, with its most recent quarter ending in July.
For investors, the key question is whether the current valuation discount on Nvidia — 21.7 times forward earnings against a five-year average of 72 times — reflects a structural slowdown or a cyclical pause. If hyperscaler CapEx reaches $1 trillion in 2027 as projected, the latter scenario becomes more likely. Broadcom's broader product base, spanning networking, storage and software, provides a buffer against any single-product cycle risk, though its higher multiple leaves less room for error.
This article is for informational purposes only and does not constitute investment advice.
