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hey everyone Nvidia and broadcom now have two things in common that are widely popular among stock market investors and that is artificial intelligence and stock splits both are very popular with investors nowadays and so investors are curious which is the better artificial intelligence stock that's also splitting its stock that's a better buy today and that's what I'll answer in this video I'll compare Nvidia and broadcom which are both AI stocks and they're both uh doing a stock split Nvidia already completed its stock split broadcom its stock split is pending and so investors that want to know which one is the better buy I'll answer that question here today comparing the two on revenue on profit on valuation and on the prospects over the next 5 year get started with the revenue growth compariso looking at the revenue growth for these two companies what we notice is NVIDIA has taken the lead from broadcom and has uh widened that lead in the most recent quarter at 262 compared with broadcom at 42.99 per.
additionally broadcom's Revenue growth was boosted by the acquisition of VMware broadcom organic Revenue growth was close to closer to 10% so broadcom does not grow its Revenue as quickly as Nvidia does although broadcom does have a history of making Acquisitions so that is a part of its regular business strategy so you can over the longer term include that in its Revenue growth expectations that every few years every uh half a decade or so broadcom will find an acquisition that will help boost the company's Revenue and profitability longer term they have demonstrated great skill in this regard Nvidia meanwhile its Revenue growth is likely to remain elevated for at least another four to eight quarters as Enterprises build out their AI infrastructure Nvidia is the primary player in providing the gpus for that buildout and some of the supporting services as as well it's not just gpus that Nvidia is providing and Enterprises that are building their AI infrastructure now the next thing I wanted to compare these two on is the operating profit margin you'll notice they've both done an excellent job in boosting their operating profit margin over the years they've both demonstrated economies and scale Nvidia at 59.84 leads broadcom at 33.514228 margin was also hurt because of the acquisition in the initial moments following an acquisition company's profit margins usually decrease as they need to digest the company digest the rising costs of the acquisition due diligence Consulting Etc but broadcom management did note that after a few more quarters the profit margin should return to broadcom's sustained overall company profit margin as they cut some costs from VMware they noted that they're going to reduce the cost the total operating expenses at VMware by roughly half down from 2.4 billion to 1.3 billion because there's a lot of redundancies when you make an acquisition right you don't need two marketing teams you don't need two Finance departments you don't need two boards of directors Etc so you can reduce costs by eliminating some of those redundant roles and that can help boost profitability which is what broadcom is expecting over the next few quarters now looking ahead on profitability the analyst on Wall Street that are following broadcom stock expect its earnings per share to increase by 17.7% over the next 5 years that would be faster than the expected earnings growth of the S&P 500 at 11.3% meanwhile the expect it to grow its earnings per share by a whopping 43% expectations more than double that of broadcom and that's understandable given that Nvidia is participating in a rapidly expanding part of the AI Market whereas broadcom is benefiting from the AI Market but not as directly as Nvidia is now I also wanted to compare their cash flow from operations to sales and you'll notice that they're relatively close here Nvidia at 50.8% compared with broadcom at 44.45mm of cash FL from operations to sales and it wouldn't surprise me if over the next let's say8 quarters broadcom takes that lead back as broadcom digests this acquisition of VMware and as nvidia's initial surging growth slows down a little bit slows down a little bit I'm not expecting Nvidia to slow down significantly but I am expecting Nvidia to slow down a little bit but I'm expecting broadcom to accelerate and so those two forces I think could lead to broadcom taking this lead back in terms I wanted to measure using the forward price to earnings ratio and looking at this metric Nvidia is more expensive at a forward price to earnings of 37.979467 the stock split whereas broadcom stock split has not yet happened is that something that goes into this valuation does that change the way I perceive broadcom versus uh Nvidia and the answer is no I typically under underestimate or I typically don't think too much of stock split and the impacts of a stock split I've talked extensively in other videos about how a stock split doesn't change the profitability or the cash flow or the revenue of a business it just makes the shares lower priced and more accessible to more investors but that doesn't make the company more profitable it doesn't make the company more cash flow positive and so those are the areas I tend to focus on more and because the price is cheaper doesn't make the stock more attractive to me or not right what makes the stock more attractive to me is the valuation is what I'm getting in return for the price that I'm paying and the valuation doesn't change with the stock split you're just getting the stock at more digestible pieces and so the stock split compared to not having the stock split yet is not having an impact on my decision for which one of these two is the better buy and so looking at just what we looked at already the revenue growth The Profit the cash flow from operations the outlook for the next 5 years we saw Nvidia more than twice the earnings per share growth expectation than broadcom I feel even though nvidia's stock is more expensive than broadcom in terms of valuation I'm not talking about the market price I'm talking about the valuation I think Nvidia has earned this premium price and so if I had to pick between these two today I would pick Nvidia as the better AI stock split stock to buy today
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