Investing In AI Chips: CRDO And AVGO Compared

David

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Post on May 27, 2025

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Investing in AI Chips: CRDO vs. CRAY (now AMD) and AVGO – A Deep Dive

The artificial intelligence (AI) revolution is upon us, and with it comes a surge in demand for specialized chips capable of handling the immense computational power required for machine learning and deep learning applications. This has sparked significant interest in investing in companies producing these crucial components. Two prominent players often compared are Coherent (COHR), Broadcom (AVGO), and AMD (formerly owning CRAY), each with unique strengths and weaknesses. This article delves into a comparison, helping investors navigate this exciting but complex market. Note that while CRDO was mentioned in the original prompt, it appears to be a misspelling, likely referring to Coherent (COHR) which is significantly involved in the necessary laser technology for chip fabrication.

Understanding the AI Chip Landscape:

Before comparing specific companies, it's vital to understand the AI chip market. This sector isn't monolithic; it encompasses several key players and technologies:

• GPUs (Graphics Processing Units): Companies like NVIDIA dominate this space, known for their powerful parallel processing capabilities ideal for AI workloads. While not directly comparable to COHR or AVGO in the same manufacturing sense, their success highlights the overall market demand.
• ASICs (Application-Specific Integrated Circuits): Designed for specific tasks, ASICs offer superior efficiency for certain AI applications but lack the flexibility of GPUs. This is a market with many smaller players.
• FPGAs (Field-Programmable Gate Arrays): Offering a balance between flexibility and efficiency, FPGAs are used in various AI applications. This sector is again highly fragmented.
• Optical Components: This is where COHR shines. Advanced chip manufacturing increasingly relies on precision laser technology for processes like photolithography – a crucial step in creating the ever-smaller and more powerful AI chips.

Coherent (COHR): A Foundation for AI Chip Manufacturing:

Coherent (COHR) isn't directly designing AI chips, but it's a critical supplier of advanced laser systems essential for the manufacturing of those chips. This indirect exposure to the AI boom makes it an intriguing investment opportunity. The demand for smaller, more powerful chips drives the need for more sophisticated laser technology, creating a strong growth outlook for COHR. Their technology is crucial for both GPU and ASIC manufacturers. Increased production of cutting-edge chips directly translates to increased demand for COHR's products.

Broadcom (AVGO): A Broad Reach in the Tech Ecosystem:

Broadcom (AVGO) is a diversified semiconductor company with a significant presence in networking, infrastructure, and wireless technologies. While not solely focused on AI chips, AVGO's broad portfolio allows it to capitalize on the increasing demand for high-bandwidth connectivity and data processing needed to support AI applications. Their involvement in various aspects of the tech ecosystem gives them a unique position, offering potentially stable growth even amidst shifts in specific AI chip technologies.

AMD (formerly owning CRAY): A Powerful Player in Computing:

AMD, having acquired CRAY, which was notable for its high-performance computing capabilities, is deeply entrenched in the high-performance computing (HPC) market, a sector closely intertwined with AI. Their CPUs and GPUs are used in various AI applications, particularly in areas like data centers and high-performance computing clusters. This makes AMD a strong contender within the AI chip ecosystem.

Investing Considerations:

Choosing between COHR, AVGO, and AMD depends on your investment strategy and risk tolerance.

• COHR: Offers high growth potential but is highly dependent on the broader semiconductor industry's success.
• AVGO: Provides more diversified exposure but may see slower growth compared to pure-play AI chip companies.
• AMD: Offers a strong position in the HPC and AI markets but faces intense competition from NVIDIA.

Conclusion:

The AI chip market is dynamic and offers diverse investment opportunities. While companies like NVIDIA capture most of the headlines, understanding the supporting roles played by companies like COHR and the broad-based technology offerings of AVGO and AMD is crucial for informed investment decisions. Conducting thorough due diligence and considering your individual risk tolerance is paramount before investing in any of these companies. Remember to consult with a financial advisor before making any investment decisions.