Chip designers like Nvidia and Broadcom hold a long-term advantage over semiconductor equipment makers ASML and Applied Materials in the artificial intelligence boom, thanks to superior pricing power and higher gross margins. ASML and Applied Materials have delivered stronger share-price returns over the past year, with ASML up 150% and Applied Materials up 200%, but Nvidia and Broadcom lead over a three-year horizon. Nvidia's gross margin reached 75% and Broadcom's 77%, compared with about 54% for ASML and 50% for Applied Materials, reflecting the designers' ability to raise prices as AI demand surges. Both groups are benefiting from massive AI capital expenditures, which are estimated to top $1 trillion next year, but the higher margins give chip designers more resilience in a potential spending slowdown.
