Nvidia Stock Gains. How Broadcom Could Hurt the Chip Maker Again.

Nvidia is the dominant provider of artificial-intelligence chips. (Marlena Sloss/Bloomberg)

Nvidia was rising early on Monday. The chip maker’s week could be shaped by an earnings report from artificial-intelligence processor rival Broadcom .

Nvidia shares were up 0.3% at $182.94 in premarket trading. The stock has fallen 8.4% over the past month, hit by concerns that custom chips designed by Broadcom for big technology companies—such as Google’s Tensor Processing Units—could eat into its dominant market share.

That raises the stakes ahead of Broadcom’s earnings report on Thursday. While Broadcom has historically been reluctant to paint itself as a direct rival of Nvidia, it was more aggressive with its previous report in September, with Broadcom CEO Hock Tan saying custom chips would progressively gain market share from Nvidia’s graphics-processing units.

Investors of both companies will be listening eagerly to see what tone Tan strikes this time, and in particular whether he will give any clues as to if Google’s TPUs will be sold more widely to external customers. That would be good news for Broadcom, which would be in line for more work with the search company.

As Barron’s has previously written, switching to different chips can involve a frustrating transition for customers to new software, meaning custom processors are often limited to internal workloads, but that could be changing. Analysts at Susquehanna recently predicted Nvidia’s AI chip market share would fall to 67% by the end of the decade—from more than 80%—while Broadcom will be the main beneficiary, rising to just under 14%.

However, Nvidia is fighting back. Citi analyst Atif Malik wrote in a research note on Monday that Nvidia’s next generation of Rubin chips will feature a cheaper GPU option, which could blunt the threat from Broadcom and Google’s chips.

“With estimated 3x reduction in total cost of ownership through the use of cost efficient GDDR7 memory vs more expensive high-bandwidth memory, we believe Rubin CPX would give XPUs like TPU/Trainium a run for their money next year,” Malik wrote.

He reiterated a Buy rating and $270 target price on Nvidia shares.

Among other chip makers, Advanced Micro Devices was rising 0.6% and Broadcom was gaining 2.4% in premarket trading.

Write to Adam Clark at adam.clark@barrons.com