Under the banner, Broadcom's TPU poses a substantial threat to GPUs: Nvidia target price lowered.
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According to news from the Chasing Wind Trading Desk, Broadcom's deepening cooperation with major tech companies in the field of AI chips is posing a substantial threat to Nvidia's GPU business. Citi analysts have lowered Nvidia's target price to $200 due to intensified TPU (Tensor Processing Unit, used for accelerating machine learning) competition, predicting that GPU sales in 2026 will decrease by about $12 billion as a result.
Citi analysts stated that Broadcom’s XPU (a general term for all kinds of processing units, including TPU, DPU, CPU, etc.) business showed accelerated growth last week, mainly driven by both new and old clients, reflecting that companies like Google are shifting from indirectly competing with Nvidia to directly providing computing power services for its competitors. This strategic shift could reshape the landscape of the AI chip market.
Despite the downward revision, Citi analysts maintain a buy rating on Nvidia, believing that the revised expectations for fiscal year 2025/26 are still 2%/5% higher than market consensus.
Last Friday, the US stock market showed a mixed picture. Broadcom’s stock price soared due to reports of plans for in-depth cooperation with OpenAI, while Nvidia’s stock price fell on competitive concerns. Currently, the market focus is on the evolving competitive landscape in the AI chip sector.
The XPU market will surpass GPU growth, but GPUs will remain dominant in the AI computing market
Citi forecasts:
The XPU market will achieve 53% year-over-year growth in 2026, significantly surpassing the 34% YoY growth in AI GPU sales. This growth will mainly be driven by capacity ramp-ups at Google, Meta, and Amazon.
Analysts predict that GPU sales will decrease by approximately $12 billion in 2026 as a result (Meta will account for about $2 billion of the GPU sales decline, while the remaining $10 billion impact comes from other clients shifting to XPU solutions). This impacts Nvidia’s previous forecast of $232 billion in commercial GPU sales for 2026 by about 5%.
Despite intensifying XPU competition, Citi believes that GPUs will continue to maintain dominance in the AI computing market, with sales expected to account for over 85% of the market. Analysts noted that the revised forecast does not include factors from the China market. If Nvidia resumes GPU shipments to China in the future, it could provide additional upside for its performance.
The new target price of $200 is based on a 30x P/E ratio multiplied by the revised 2026 earnings per share. Analysts emphasize that despite competitive pressures, Nvidia’s core position in the AI chip sector will be hard to shake in the short term.
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