Score one to Nvidia. The chip company emerged as the clear winner over rival Broadcom when it comes to the market reaction to their latest earnings report. It was helped by a lower valuation and its efforts to diversify its customer base.

It's not that there was much wrong with Broadcom's earnings. It guided for artificial-intelligence chip sales to double in fiscal 2028 from fiscal 2027. That compares well with Nvidia's 70% revenue growth forecast, although that was for its entire business.

But when it comes to earnings, it's all about the expectations game. Nvidia's projections were well ahead of what Wall Street analysts had penciled in. Broadcom's longer-term forecast handily beat expectations but its near-term guidance was only a slight improvement.

Any disappointment is also more painful at a higher valuation. Broadcom went into its earnings report trading at a forward price-to-earnings multiple of 20.2 times, according to FactSet, compared with Nvidia which was trading at less than 17 times.

Broadcom shares were down 3.9% in Thursday's premarket, while Nvidia was flat after CEO Jensen Huang confirmed the company has agreed to buy Hugging Face-the popular marketplace for open-source AI models. And the gap is also evident over a longer time period-Nvidia stock is up 31% over the past 12 months, against a 20% gain for Broadcom.

Beyond the numbers, there has also been a shift in narrative. The previous concern was that Broadcom's custom chip work with the likes of Google and Meta would displace Nvidia's hardware. But now Broadcom is battling to stave off other chip designers such as MediaTek-which Nvidia just backed with a $3.5 billion investment-for those contracts.

Meanwhile, investors are warming to Nvidia's strategy of freeing itself of dependence on a few large customers by funding dozens of startups across the AI sector.

It's just one round in the AI chip bout and it's far too early to call a winner yet. But for now, Nvidia is in the ascendancy.