Nvidia's $600 Billion Sell-Off: AI Market Disruption or Buying Opportunity?

Nvidia Stock Sell-off Presents A Buying Opportunity? - NVIDIA (NASDAQ:NVDA)

NVIDIA saw $600 billion in market value wiped out in a single day - the largest single drop in the company's history. The reason is anything but a mystery. A Chinese company, DeepSeek AI, released a new Large Language Model (LLM) that rivaled the performance and capabilities of big players like OpenAI, Meta, and Google. The kicker? DeepSeek AI was created for just $6 million, operates at 1/20th the cost, and is built on older-generation NVIDIA chips. This release sent shockwaves through the AI world, rattling the cages of even the biggest firms. How could a company so small produce something of this caliber, for this cost, on this architecture? After all, American companies have poured billions into developing their technology over the past 2 years, the United States Government has committed $500 billion into AI infrastructure, and orders of NVIDIA's latest GPUs have been skyrocketing. As it pertains to NVIDIA, this all brings up two valuable questions: if we can get more for less, are the needs for all of these GPUs and infrastructure investments overblown? And is this a long-term concern for NVIDIA's AI dominance and share price? The answer is a resounding NO. Here's why. He Said, She Said First, it's important to know that due to China's policies and relationship with the United States, very little information can be verified about DeepSeek's claims. While they claim that their LLM was built on a very modest number of NVIDIA chips - compared to its counterparts - reports have risen that show they may be in possession of over 100,000, which far exceeds the amount allowed under trade restrictions between the US and China. What this means is that we do not have the true picture as to how DeepSeek operates, and if the actual cost of development truly is $6 million or a much higher number. In addition to this, there are also now reports that DeepSeek built its technology by "stealing" from OpenAI's LLM, ChatGPT. This would greatly challenge the claim that a company can build a tool like DeepSeek for such a small investment. Creatively Different Next, it's important to understand how DeepSeek operates. Whereas the leading LLMs leverage their massive datasets to produce high quality outputs by guessing what a user wants to see, DeepSeek learns through user-guided behavior. In other words, it trains itself by presenting multiple options and learning from the user's responses. This innovative approach enables DeepSeek to operate at a lower cost because it requires significantly less energy and processing power, which is why they can operate on older technology at a fraction of the price. But do not let the label "older-generation" fool you when it comes to NVIDIA chips. Even the older generation are decades ahead of competitors. NVIDIA's Decade-Long Head Start NVIDIA has a massive lead in AI chip technology due to its long-time dominance in gaming. That's because the processing power required for games is far different than that required for computers. Where other chip makers such as Intel leaned into making chips dedicated to computer processing applications (CPUs), NVIDIA built its technology for the rigorous needs of the gaming world (GPUs). This approach is paying massive dividends today as AI requires similar processing requirements, albeit at a much higher level. There's a reason DeepSeek built its chips on NVIDIA technology. Because it's far superior to anything else on the market and nobody else can come close to its capabilities. NVIDIA has built itself a solid head start in AI infrastructure with no signs of slowing down. No Infrastructure = No AI AI requires two very important factors in order to operate: processing power (aka compute), and energy. No matter how advanced the AI technology is, it cannot do anything without these things. So, while it's impressive that DeepSeek was able to achieve the results it has, none of it is possible without the right infrastructure. Taking it a step further, AI is in its infancy and will only continue to grow. Global AI adoption is at the lowest it will ever be as businesses and individuals are just now beginning to understand what it can do. As the use-cases and applications of AI expand, so too will the power and processing requirements. This bodes well for NVIDIA in the long-term. Will Demand for NVIDIA GPUs Drop? While DeepSeek's release may give competing LLMs a reason to sweat, it does not do much to diminish the need for high-end processing power such as NVIDIA GPUs. As technology expands and AI workloads grow, cutting-edge computational power will only increase in importance. Eventually, even companies like DeepSeek will need to upgrade their infrastructure to accommodate the needs of tomorrow. Unless China can figure out a way to produce these chips themselves, which is a difficult task considering the aforementioned head start that NVIDIA has given itself, NVIDIA will likely be the beneficiary. Is NVIDIA's Stock Sell-Off a Buying Opportunity? The $600 billion drop in NVIDIA's market cap was driven by fear, not fundamentals. Investors were spooked by the idea that AI innovation could become significantly cheaper and that competition could erode NVIDIA's dominance. But NVIDIA remains the AI market leader, and its long-term growth trajectory is still intact. As any savvy investor knows, market corrections create buying opportunities. NVIDIA's stock dip presents an entry point for those who believe in the long-term AI revolution. Where Will NVIDIA's Stock Be in a Year? While some proponents may believe NVIDIA's stock may be over (or under) valued, and short-term volatility is inevitable, the fundamentals remain strong. Over the next year, NVIDIA is likely to launch its next-gen GPU architecture, expand its partnerships with major players like Microsoft, Amazon, and Google, and benefit from greater AI adoption. With AI demand only increasing, NVIDIA's position as the gold standard of AI compute is unlikely to change anytime soon. The sell-off may have rattled investors, but in reality, NVIDIA's AI dominance remains unchallenged. Rather than signaling weakness, this market reaction could be a golden buying opportunity for those who see the bigger picture. Note: The opinions expressed in this article are solely the author's, and in no way should constitute financial advice. NVDANVIDIA Corp$129.970.10%Overview Rating:Good75%Technicals Analysis1000100Financials Analysis600100WatchlistOverviewMarket News and Data brought to you by Benzinga APIs

If I Could Only Buy One AI Stock, This Would Be It | The Motley Fool

Despite DeepSeek's success, Nvidia remains a force to reckon with in the global AI market. Share prices of semiconductor giant Nvidia (NVDA 0.90%) are down by about 5% so far in 2025. Despite solid fundamentals, the company's stock tanked on marketwide concerns about a potential slowdown in artificial intelligence (AI)-related spending in the coming months. Wall Street panicked after Chinese start-up DeepSeek announced training an open source AI model, DeepSeek-R1, for less than $6 million -- significantly lower than the $100 million used to train OpenAI's GPT-4. However, many industry experts are now casting doubts on DeepSeek's claims about training the model with only 2,000 H800 graphics processing units (GPUs) in contrast to 25,000 H100 GPUs for GPT-4. Scale AI CEO Alexander Wang has suggested that DeepSeek has used as many as 50,000 H100 chips but has not disclosed this due to U.S. export controls. While Wang has not provided any evidence, it raises questions about the credibility of DeepSeek's claims. However, even if DeepSeek has succeeded in realizing cost efficiencies in the generative AI space, it can eventually prove beneficial for Nvidia. With technology becoming more cost effective and efficient, demand will surge, which in turn will drive up the total addressable market and sales of AI-optimized chips. Hence, Nvidia seems negatively impacted by disproportionate fears. It may make sense for astute investors to buy this stock on the recent dip. Here are a few reasons why I think it's a compelling pick in 2025. Nvidia has been successful recently in demonstrating top- and bottom-line performance at scale. In its fiscal 2025's third quarter (ended Oct. 27, 2024), revenue soared 94% year over year to $35.1 billion, driven mainly by a 112% year-over-year jump in data-center revenue to $30.8 billion. The company also boasts impressive gross margins in the mid-70s percentage range, although these may be modestly affected in the initial ramp-up period of Blackwell systems. Thanks to the company's robust profitability, Nvidia is committed to returning significant value to shareholders. In Q3, the company returned $11.2 billion as dividends and share repurchases. Finally, management expects revenue to reach $37.5 billion plus or minus 2% in the fourth quarter. The high revenue visibility is attributed to continued demand for Hopper architecture chips and the initial ramp-up of Blackwell systems. With demand for AI chips far outpacing supply, the company is expected to enjoy significant pricing power in the future months. Nvidia's next-generation, end-to-end AI infrastructure solution, Blackwell, is expected to play a pivotal role in maintaining Nvidia's dominance in the accelerated computing space, especially since AI workloads are becoming increasingly more demanding and complex. This infrastructure solution supports seven different chips, multiple networking offerings, and air-cooled and liquid-cooled data centers. Furthermore, according to recent MLPerf Training results, Blackwell has demonstrated 2.2 times better performance and 4 times lower computing costs compared to previous Hopper generation chips running the GPT-3 benchmark model. The subsequent cost savings and high flexibility are expected to translate into even higher demand for Blackwell systems across industries and deployment environments. Nvidia is currently in full production mode for Blackwell systems. The company shipped 13,000 Blackwell GPU samples in Q3 and expects Blackwell revenue to exceed previous estimates of "several billion dollars" in the fourth quarter. Enterprises are also increasingly opting for the Nvidia AI Enterprise platform, (which includes NVIDIA NeMo and NIM microservices) as an operating platform for developing Co-Pilots and custom AI agents. Prominent companies such as Salesforce, Cloudera, SAP, and ServiceNow are using this platform to accelerate the development of AI applications. Subsequently, the Enterprise AI platform is expected to become a major revenue driver in the coming months considering that almost 1,000 companies are already using NVIDIA NIM. Management expects Nvidia AI Enterprise revenue to more than double year over year in fiscal 2025. Nvidia has successfully transitioned from a hardware company to a full-stack AI infrastructure provider. Nvidia also sees significant opportunities in areas such as industrial AI, autonomous systems, and robotics wherein foundation models have to interact and understand the physical world. The company is gearing up to capitalize on these physical AI opportunities with Nvidia's Omniverse platform and its new Cosmos technology. Nvidia is trading at about 28 times forward earnings, which may seem expensive by traditional standards. However, several factors justify the seemingly rich valuation. Analysts expect the company's revenue and earnings per share (EPS) to grow year over year by 112% and 127%, respectively, in fiscal 2025. The chip giant is well poised to benefit from the two fundamental shifts in global computing: a trillion-dollar upgrade cycle at data centers to shift from CPU-based computing to accelerated computing and the emergence of AI factories producing 24/7 digital intelligence. Finally, despite sustainable competitive advantages, such as around 90% share in the global GPU market and a robust software ecosystem built to support its hardware offerings, the company trades at a price/earnings-to-growth (PEG) ratio of just 0.2. Thus, considering the company's future growth potential, Nvidia seems like a smart pick for 2025.

3 Reasons to Buy This Artificial Intelligence (AI) Stock on the Dip | The Motley Fool

The popular phrase "reports of my death are greatly exaggerated," an adaptation of a famous Mark Twain quote, is a terrific way to describe Nvidia (NVDA 1.71%) after the DeepSeek bombshell (more on this below) sank its stock more than 20%. The stock is still more than 16% off its recent high. Is this a major warning sign or a tremendous opportunity to buy the dip? Nvidia is far from finished powering the world of artificial intelligence (AI) or being relegated to obsolescence. Here are three reasons to snatch up the stock now. You probably already know that Nvidia's gold mine product is its advanced graphics processing units (GPUs). Computers use GPUs for their visual elements. However, the tremendous demand comes from data centers and artificial intelligence (AI). Big tech companies like Meta Platforms (META 0.96%), Alphabet (GOOGL 2.56%), Elon Musk's xAI, ChatGPT-developer OpenAI, and many others use Nvidia GPUs to train their AI models. Training AI models requires thousands of GPUs. For instance, Meta's Llama 3.1 reportedly used 16,000, and xAI's Colossus data center uses 100,000. Chinese AI company DeepSeek claims it created a chatbot that rivals ChatGPT using just 2,000 Nvidia chips for just $6 million. The market panicked as Wall Street speculated that this breakthrough meant other big tech companies wouldn't need nearly as many Nvidia GPUs. But is DeepSeek's claim true? Remember, extraordinary claims require extraordinary evidence -- many are not convinced. Some industry billionaires and insiders believe that DeepSeek actually has 50,000 Nvidia GPUs, and the actual cost of its model is $500 million. DeepSeek may have exaggerated its success for publicity but also for geopolitical reasons. The U.S. limits the chips it lets China buy through export controls, so DeepSeek's minimization makes sense. The bottom line is that it's highly likely big tech will continue spending billions on Nvidia's powerful GPUs. Let's check out some illuminating charts for the second and third reasons. Nvidia had an incredible fiscal year 2024 (which ended January 2024). Sales grew 125% to $61 billion, and non-GAAP (adjusted) operating income hit $37 billion, an astounding 61% margin. Nvidia blew past these numbers through just three quarters of fiscal 2025, as shown below. The non-GAAP (meaning not in accordance with generally accepted accounting principles) operating margin widened to 67%. This increase indicates that demand is strong and that Nvidia's customers are willing to pay high prices. The revenue translates to free cash flow and bottom-line net income. Net income hit $51 billion through the third quarter of fiscal 2025, compared to $17 billion for the same period in the previous year, while free cash flow ballooned to $45 billion through Q3 of fiscal 2025 compared to $27 billion for the entire fiscal 2024. It isn't easy to put a definitive value on Nvidia because it's not clear how long it can sustain this spectacular growth. AI and data center investments are ramping up swiftly, and the tailwinds will likely last for many years. Statista's global forecast is for the AI market to hit $244 billion in 2025 and $827 billion by 2030. Nvidia's GPUs are critical to this expansion. Many investors believed the stock was overvalued despite the growth potential; however, the recent sharp decline offers a much better entry point. As you can see below, the forward price-to-earnings (P/E) ratio declined well below recent historical averages. The earlier declines shown in the chart in early 2023 and early 2024 were also excellent times for long-term investors to purchase the stock. The DeepSeek news is interesting but hardly a death knell for Nvidia. The claims appear to be exaggerated. Meanwhile, Nvidia's results are incredible, and the valuation looks reasonable once again.

Is Nvidia Stock Still a Buy After DeepSeek's Breathtaking Innovation?

DeepSeek sent shockwaves through the AI investing world when it announced that it trained its R1 generative AI model for less than $6 million. Even more impressive is that some of its capabilities are on par with other leading generative AI models like ChatGPT and Claude. This caused many AI-related investments to fall last week. While some have recovered, Nvidia (NVDA 1.71%) has not. Nvidia's stock is around 20% off its all-time high, thanks to the DeepSeek scare, but I don't think investors should panic sell. Instead, they should consider this a buying opportunity, as the AI race has become more competitive. Why are people worried about Nvidia? The biggest scare from DeepSeek's breakthrough is that companies won't need the same amount of computing power as they thought, because more efficient training techniques are possible. Because Nvidia's business is predicated on selling high-powered graphics processing units (GPUs) that are incredible at processing these intense calculations, the prevailing notion is that AI investments may slow down. This is what caused the stock to tumble. However, I don't think that's the correct way of assessing the situation. While DeepSeek's discoveries are innovative and revolutionary, their objectives differ from those of U.S. AI firms. Because the U.S. has imposed strict export restrictions on China and its allies, it doesn't have access to the most powerful chips. So, DeepSeek (and other Chinese AI firms) used Nvidia H800 GPUs, which are watered-down H100 GPUs, to meet export regulations. These aren't as powerful, so DeepSeek's engineers had to figure out a more efficient way to use the hardware to get the maximum performance out of them. This is how DeepSeek created a far more efficient generative AI model. U.S. firms will likely integrate some of DeepSeek's findings into their models, but none of the domestic companies are going for peak efficiency. Instead, they're in a race to create the most powerful model possible, spending whatever is necessary to get there. A few of the large tech companies have already commented on DeepSeek's innovation, like Meta Platforms (META 0.96%). CEO Mark Zuckerberg noted that DeepSeek has made a few "novel" innovations that Meta's working to incorporate, but stated that Meta isn't changing its $60 billion or greater capital expenditure plans for 2025. This is great news for Nvidia and means that its GPUs will still be needed. As a result, using this sale as a buying opportunity looks like a genius move. Nvidia's stock is the cheapest it has been in some time Because Nvidia is still growing its revenue rapidly, using trailing earning metrics can give a false impression of where the company is headed. However, they're also useful in this case because its future had a wrench thrown into it thanks to DeepSeek's breakthrough. At 47 times trailing earnings, the stock looks pricey. However, considering that Wall Street analysts still expect Nvidia's revenue to grow by 52% in fiscal year 2026 (ending January 2026), that doesn't seem like too stiff a price to pay for the stock. While investing in Nvidia's stock with the threat of more efficient AI models on the horizon carries more risk, I think Nvidia will be OK over the long run. This short-term scare should be put to rest after Nvidia's fourth-quarter fiscal year 2025 earnings are reported later in February. Nvidia stock looks like a great buy here, and I'll be scooping up some more shares.

Is Nvidia Stock a Buy? | The Motley Fool

Perhaps no stock exemplified the past year's artificial intelligence (AI) frenzy more than Nvidia (NVDA -2.84%). The semiconductor chipmaker's business benefited as tech companies spent billions of dollars to buy its AI offerings. Shares of Nvidia were up nearly 90% over the past 12 months through the end of January. But when Chinese start-up DeepSeek announced on Jan. 27 it produced a large language model (LLM) for less than $6 million, a fraction of the money spent by U.S. companies, Nvidia shares plunged 17%. The stock since recovered, but it's still below the 52-week high of $153.13 reached on Jan. 7. Does this create a buying opportunity? Or is DeepSeek threatening to upend Nvidia's future earnings? Read on to learn if Nvidia remains a worthwhile long-term investment in AI. DeepSeek's AI price tag was shockingly low, prompting concerns that Nvidia will lose business. If one company were able to produce the AI technology inexpensively, others could do so without Nvidia's pricey products. But the Chinese start-up's success is unlikely to impact Nvidia in a substantial way for several reasons. For starters, it's possible DeepSeek used restricted advanced AI chips. The U.S. Commerce Department is investigating that possibility. In addition, ChatGPT creator OpenAI accused DeepSeek of stealing OpenAI's data to make its software. AI requires mountains of data to perform tasks, so if DeepSeek inappropriately used OpenAI's content, that's another reason others may not be able to replicate LLMs on the cheap. Moreover, the U.S. is in a battle with China for digital supremacy. This led to export restrictions on the sale of AI chips to China. After DeepSeek's arrival, more restrictions may be coming, which would make it challenging for other Chinese companies to develop low-cost LLMs. The U.S.-China rivalry may also result in DeepSeek being banned. The DeepSeek AI technology is already barred by federal agencies such as the U.S. Navy and NASA. The U.S. passed a law banning another Chinese company, TikTok, over privacy and security concerns. President Donald Trump paused the ban's implementation, but eventually it will happen unless Congress reverses it or TikTok is sold to a U.S. business. Given how much AI relies on data to function, banning DeepSeek and other Chinese AI companies makes more sense than banning TikTok. A U.S. ban is not the only possibility. Italy banned DeepSeek at the time of this writing. Such actions by other nations would curb AI competition from China. These factors indicate Trump's recently announced Stargate project, which calls for up to half a trillion dollars in AI infrastructure investment, will proceed as planned. Nvidia is one of the companies working on the project. Nvidia CEO Jensen Huang met with Trump on Jan. 31 to discuss AI policy. That level of access and input into U.S. AI strategy means Nvidia is positioned to benefit as policies evolve. After all, Nvidia is already seen as the preeminent AI chip provider. Its reputation helped it achieve record revenue of $35.1 billion in its fiscal third quarter, ended Oct. 27, 2024. This represents an impressive 94% increase from a year ago. On top of its revenue growth, the company's other financials are outstanding, illustrating its strong underlying business. Its Q3 net income of $19.3 billion was a 109% increase from the prior year. Its Q3 balance sheet contained $96 billion in total assets, including $38.5 billion in cash, cash equivalents, and investments. Nvidia's cash hoard alone is greater than its Q3 total liabilities of $30 billion. Adding to this, the chipmaker's latest computing architecture, Blackwell, is selling well. CFO Colette Kress said on the earnings call, "We are on track to exceed our previous Blackwell revenue estimate of several billion dollars." The company is also more than an AI company. Its chips are used in other industries, such as in robotics, PCs, gaming consoles, and the automotive sector as cars increasingly add more digital capabilities. Nvidia's strong financials and revenue growth, the popularity of its products, and the diverse range of applications for its chips put the company in a position to prosper for years to come, making its stock an excellent long-term AI investment. And now is a good time to buy shares. That's because of Nvidia's stock valuation. Here's a look at its price-to-earnings (P/E) ratio, which tells you how much investors are willing to pay for a dollar's worth of earnings. Nvidia's P/E multiple is on the low end of where it's been over the past year at the time of this writing. This indicates the company's shares are reasonably priced compared to the past. Its stock valuation adds to its strong business, making now a good time to scoop up shares of this leading AI chipmaker ahead of its fiscal Q4 earnings report on Feb. 26.

Nvidia Stock: Deep Capex Analysis Shows Compute Clusters As The AI Moat (NASDAQ:NVDA)

A ~50% one-year return target positions Nvidia Corporation stock attractively, though evolving efficient training architectures may temper long-term GPU demand -- warranting ongoing vigilance for NVDA. I covered the DeepSeek (DEEPSEEK) news when it first widely disseminated in the press. However, I had limited time to perform deep research into the effects on Big Tech capital expenditures ("capex") over the coming years, and Oliver Rodzianko is an investment analyst specializing in the technology sector, grounded in timeless value principles. His expertise spans AI, semiconductors, software, and renewable energy, with a focus on companies that demonstrate resilient management and lasting competitive advantages. A trusted voice in financial analysis, Rodzianko's insights are frequently highlighted as 'Must Reads' on Seeking Alpha, syndicated to Forbes via GuruFocus, and published on TipRanks.Rodzianko specializes in value trading at inflection points without leverage and without short interest. He typically holds investments for one to two years, selling them at fair value. Additionally, he models a wealth-preservation portfolio and employs advanced risk-mitigation strategies to protect against and capitalize on recessions and market crashes. Rodzianko Asset Management Rating System:Strong Buy: For value trading, Oliver Rodzianko anticipates an annual return of 30% or above for the time period specified in the analysis. For long-term investments, an annual return of 20% or above is expected for the time period specified in the analysis.Buy: For value trading, Oliver Rodzianko anticipates an annual return of 22.5% or above for the time period specified in the analysis. For long-term investments, an annual return of 15% or above is expected for the time period specified in the analysis.Hold: For value trading, Oliver Rodzianko anticipates an annual return of 15% or above for the time period specified in the analysis. For long-term investments, an annual return of 10% or above is expected for the time period specified in the analysis.Sell: For value trading, Oliver Rodzianko anticipates an annual return of at least 0%, but generally well below 10%, for the time period specified in the analysis. For long-term investments, he similarly expects an annual return of at least 0%, yet typically under 10%, for the time period specified in the analysis.Strong Sell: For value trading, Oliver Rodzianko anticipates zero or negative annual returns for the time period specified in the analysis. For long-term investments, he similarly anticipates zero or negative returns for the time period specified in the analysis. Analyst's Disclosure: I/we have a beneficial long position in the shares of NVDA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Nvidia Stock Investors Just Got Great News From Amazon and Google-Parent Alphabet | The Motley Fool

In January, Chinese start-up DeepSeek introduced an artificial intelligence (AI) chatbot that quickly became the most downloaded free mobile application in the U.S. Importantly, the base large language model behind the DeepSeek application allegedly cost $6 million to train and reportedly outperforms top U.S. models on certain benchmarks. That shook Wall Street because OpenAI spent over $100 million training its GPT-4 model and supposedly had access to more advanced chips than DeepSeek. Investors rushed to the conclusion that U.S. companies have been overspending on AI infrastructure, and Nvidia (NVDA 0.90%) shares fell 17% on the news, erasing $600 billion in market value. That is the largest single-day loss in U.S. history. Nvidia shares are still down by about 9% since DeepSeek rattled the market, and the stock is currently 13% off its all-time high. But Nvidia shareholders just got some good news from Amazon (AMZN -4.05%) and Alphabet (GOOGL -3.27%). Read on to learn more. Many analysts have praised DeepSeek for its engineering breakthroughs. The company reduced expenses by cutting down on data processing with innovative training techniques. However, several analysts also question whether DeepSeek has been completely forthcoming about its infrastructure and the associated costs. For instance, Dan Ives at Wedbush Securities wrote, "Saying DeepSeek was built for $6 million with no Nvidia next generation hardware is likely a fictional story." Likewise, research company SemiAnalysis reports that DeepSeek not only had next-generation Nvidia GPUs but also incurred about $1.6 billion in expenses while training its model. Importantly, cost efficiencies could actually boost demand for Nvidia graphics processing units (GPUs) by enabling faster diffusion of artificial intelligence (AI) through the economy. Put differently, if novel training methods reduce model development costs, more software companies will build AI products, increasing the total demand for Nvidia GPUs. Last week, Amazon and Google parent Alphabet reported fourth-quarter financial results. Both companies said capital expenditures would increase substantially in 2025, as they are currently supply-constrained where AI infrastructure is concerned. Amazon CEO Andy Jassy predicted costs associated with developing AI models will continue to fall. But he also said, "I think it will make it much easier for companies to be able to infuse all their applications with inference and with generative AI." And CFO Brian Olsavsky told analysts that capital spend may exceed $100 billion in 2025, up from $83 billion in 2024, due to demand for AI infrastructure. Alphabet CEO Sundar Pichai provided similar insights. He said a greater percentage of capital expenses are shifting toward inference as training becomes less expensive, implying DeepSeek's breakthroughs would not slow AI spending. Indeed, CFO Ana Ashkenazi told analysts that capital expenditures would total $75 billion in 2025, up from $52 billion in 2024, due primarily to investments in data centers, servers, and networking. The capital spending guidance from Amazon and Google parent Alphabet corroborates the narrative that demand for Nvidia GPUs could actually increase as training costs decline because companies will shift their resources toward inference. Andy Jassy compared the situation to how cloud computing sales have actually increased over time despite cloud services becoming less expensive. "What happens is companies will spend a lot less per unit of infrastructure, and that is very, very useful for their businesses. But then they get excited about what else they could build that was always cost-prohibitive before, and they usually end up spending a lot more in total on technology once you make the per unit cost less. I think that is very much what's going to happen here in AI." Wall Street estimates Nvidia's adjusted earnings will grow at 52% annually through fiscal 2026, which ends in January 2026. That consensus makes the current valuation of 50 times adjusted earnings look cheap. Admittedly, analysts have set a very high bar, so the stock could fall sharply if Nvidia misses those expectations. Here is the bottom line: Nvidia shareholders worried about the DeepSeek drama can take a deep breath. Many analysts think more efficient AI training techniques will lead to greater demand for Nvidia GPUs. And evidence from the largest hyperscale cloud companies supports that conclusion.

Is Nvidia the Greatest Artificial Intelligence (AI) Stock? | The Motley Fool

Artificial intelligence (AI) has probably been the hottest investment theme on the planet over the past year. Companies involved in this high-growth area have seen their share prices climb in the triple digits and have fueled gains in the three major benchmarks -- the S&P 500, the Dow Jones Industrial Average, and the Nasdaq. Investors have piled into AI stocks because of the technology's potential to streamline processes and develop game-changing new products and services. Today's $200 billion AI market is forecast to reach more than $1 trillion by the end of the decade, offering significant growth opportunities for companies involved -- and investors who get in on these growth stories early. And one particular growth story that's attracted a lot of attention is Nvidia (NVDA 0.90%), a stock that's soared 1,900% over the past five years. The company has gone from primarily serving the video gaming market with its chips to dominating the AI chip market -- and revenue has exploded higher, climbing in the double or triple digits quarter after quarter. But is Nvidia really the greatest AI stock around? Let's find out. So, first, let's talk a bit about AI in general. The technology, by leveraging the power of large language models (LLMs), is helping companies, researchers, and even you and me in our daily lives on a variety of tasks. Some of these uses are more important than others, and certain can be game-changing. For example, AI is streamlining processes for companies, identifying risks to their businesses, and powering the development of new life-saving drugs and medical devices. Many types of companies could generate earnings growth thanks to AI: those designing the tools for the development of LLMs and AI platforms, cloud providers offering customers access to these tools, companies including AI in the products and services they sell to others, and companies applying AI to their businesses to gain in efficiency and reach new accomplishments. That's a lot of potential AI winners. Now, let's move on to consider Nvidia's position in the AI market. The company is the dominant player in AI chips thanks to the quality of its graphics processing units (GPUs). These chips are the fastest around, powering key tasks like the training and inferencing of models. Inferencing is a particularly important function because it involves the reasoning the model goes through to answer complex questions -- and here, it's key to use many high-powered GPUs. So, this represents a growth area for Nvidia. But Nvidia isn't only about chips. The company has built an entire ecosystem of AI products and services, including enterprise software -- and this is allowing Nvidia to remain involved in every stage of a customer's AI development and serve every type of customer. You can go to Nvidia for GPUs and networking options, for example, or you can sign on for enterprise software to streamline the deployment of an entire AI platform. Nvidia even is set to play a big role in the next wave of AI growth: agentic AI, or AI-driven software that can reason and solve problems. The company and its partners have designed AI blueprints to help customers design their own AI agents to be used through the Nvidia Enterprise system. Some investors have worried about rivals challenging Nvidia's dominance, but the company's leadership position today and commitment to innovation will make it difficult for another player to unseat it. Another concern, which arose recently when DeepSeek said it trained a model for less than $6 million, was that Nvidia customers may follow that route -- and cut their training budgets. I don't see that happening. First, experts already are saying DeepSeek's figures aren't accurate -- and the Chinese start-up actually spent a lot more than it announced to train its model. And second, if indeed it is possible to train a model for a very low price, more and more companies would launch AI programs -- offering Nvidia the opportunity to gain on volume. Finally, it's important to remember that Nvidia GPUs could see significant growth as inferencing takes off. So, let's get back to our question: Is Nvidia really the greatest AI stock? There are many very strong AI players out there that make wonderful investments. But, if you're looking for just one AI stock to buy right now, Nvidia is the name to snap up. I consider this company the ultimate AI stock because it benefits from every stage of AI development -- from the infrastructure buildout to the actual application of AI to real world situations. Across those stages, customers will flock to Nvidia, and that should result in fantastic earnings growth -- and share price performance -- over the long run.

Will DeepSeek's Artificial Intelligence Model Destroy Nvidia's Valuation? | The Motley Fool

Did DeepSeek's artificial intelligence (AI) model really cost less than $6 million to make? If that's the case, it makes you wonder what big tech plans to spend tens of billions of dollars on this year, not to mention the massive $500 billion Stargate project that President Trump announced last month. DeepSeek's numbers may be grossly underestimated, however, with a recent report suggesting that the company may have spent well over $500 million just on its hardware. It'll inevitably take time before investors get a good grasp on just how concerning of a problem DeepSeek's AI development is or isn't for the tech sector. In the meantime, one stock that's been declining on these developments is chipmaking giant and AI figurehead Nvidia (NVDA 0.90%). The stock has been synonymous with AI development, as its chips have been viewed as crucial for companies developing next-gen models. The news related to DeepSeek has already resulted in some sizable losses to Nvidia's market cap, but could this be just the start -- is more of a sell-off coming? The best and brightest minds in tech work in the U.S., for top tech companies such as Nvidia, Microsoft, Apple, and other well-known names. To suggest a Chinese start-up company that launched in 2023 has put to shame some of the most successful and most valuable businesses in the world is just not a scenario I'd consider highly plausible. Odds are, DeepSeek's costs to develop its AI model are significantly understated. After all, it's not as if investors have audited financial statements they can look at to assess the true costs. ChatGPT-maker OpenAI is also alleging that DeepSeek used its AI models in creating the new chatbot. "We are aware of and reviewing indications that DeepSeek may have inappropriately distilled our models." If DeepSeek did rely on OpenAI's model to help build its own chatbot, that would certainly help explain why it might cost a whole lot less and why it could achieve similar results. For now, however, I wouldn't rush to assume that DeepSeek is simply much more efficient and that big tech has just been wasting billions of dollars. If DeepSeek's AI model does indeed prove to be too good to be true and cost much more than the company said it did, it still may not necessarily lead to a significant rebound in Nvidia's valuation. What the news relating to DeepSeek has done is shined a light on AI-related spending and raised a valuable question of whether companies are being too aggressive in pursuing AI projects. This could lead to companies reevaluating their tech needs and determining whether all that spending is justifiable. And a time when the threat of tariffs is weighing on the economy, it may be tempting for businesses to scale back their AI-related expenditures given the uncertainty ahead. For Nvidia, a company that has soared in value due to its impressive growth, any slowdown in demand could make the chipmaker's stock vulnerable to more of a correction. As of Monday, Nvidia's stock was down 12% to start the new year. And based on analyst projections, it's now trading at 28 times its future profits, which isn't all that expensive for a top tech company. But if those projections come down, then the stock's valuation won't look nearly as attractive as it does today. However, if you're buying the stock for the long haul, it may not be a bad idea to load up on it today. The company's impressive profit margins, strong market position, and reduced valuation could make now an optimal time to add Nvidia's stock to your portfolio since it still has a bright future ahead.

3 Reasons Why I'm Still Loading Up on Nvidia Shares | The Motley Fool

Nvidia's (NVDA 5.21%) stock has been beaten down over the past two weeks thanks to the release of DeepSeek's efficient generative AI model. Because DeepSeek reportedly trained its artificial intelligence (AI) model for less than $6 million, many investors are assuming that companies like Nvidia that supply this computing power are in trouble, as the AI hyperscalers won't spend as much because more efficient computing methods are possible. While this is a reasonable train of thought, I don't think it's valid, as there are multiple indications that Nvidia will be fine. I've got three reasons why Nvidia stock is still a buy right now, and investors would be smart to take advantage of it while it's on sale. The biggest fallacy from investors assuming that Nvidia is toast due to more efficient AI models becoming available is the premise that U.S. AI hyperscalers are concerned with efficiency. The reason why DeepSeek chose to make its model more efficient is because it had to. DeepSeek is limited to what computing power it has access to, as the U.S. imposed strict export restrictions on Nvidia's hardware to China. As a result, DeepSeek had to train on H800 GPUs versus the more powerful H100 counterparts that are normally used in the U.S. Because it had to focus on efficiency to make the model, the result was naturally efficient. Domestic AI companies don't have these same limitations, as they have access to near-unlimited computing power without any regulations to deal with. So, they haven't focused on efficiency but are instead building out as much computing capacity as possible to produce the most powerful AI models. This is why initiatives like the $500 billion Stargate Project or companies like Meta Platforms are spending $60 billion to $65 billion on capital expenditures this year, most of which will be directed toward AI computing power. These companies will still be spending truckloads of money with Nvidia throughout 2025 and beyond, so there shouldn't be fears of Nvidia's sales slowing down in 2025. Another innovation Nvidia has up its sleeve is its next-gen Blackwell architecture. The Blackwell architecture far exceeds the performance of the previous-generation Hopper architecture, including being able to train AI models four times faster. These GPUs are an incredible performance boost, and many companies are trying to get their hands on them. But Nvidia can't keep up right now. During its Q3 conference call (which occurred on Nov. 20), Nvidia CFO Colette Kress stated, "Blackwell demand is staggering, and we are racing to scale supply to meet the incredible demand customers are placing on us." Nvidia is still realizing this growth catalyst, which bodes well for the stock in 2025. During Nvidia's run, it has rarely looked cheap. However, I'm willing to state that it has nearly reached that level. Because of Nvidia's rapid growth, using trailing earnings metrics isn't a great way to assess the stock. As a result, I'll use Nvidia's forward price-to-earnings (P/E) ratio. Thanks to the massive drop-off, Nvidia's stock trades for just 26 times forward earnings. For the growth that Nvidia is putting up, that's dirt cheap. For comparison, the S&P 500 trades for 22.3 times forward earnings, so Nvidia really doesn't hold that much of a premium to the broader market. This is despite multiple growth catalysts and a generational technological shift that Nvidia is at the center of. With Nvidia's stock down over 20% from its all-time high, I think it's a smart move for investors to take a position now, as it's rare that Nvidia goes on sale like this.

Should You Forget Nvidia and Buy This Artificial Intelligence (AI) Stock Instead? | The Motley Fool

Today, let's examine what has happened with Nvidia and whether another stock might be the smart choice for AI investors in 2025. A good rule of thumb for investing is to always have a thesis -- a rationale for why you believe a stock will deliver value over the long term. For Nvidia, the most widely accepted thesis explaining the rapid rise of its stock is that the company will be the engine behind the AI boom. The AI revolution will require millions of GPUs, and Nvidia will be selling many of them, generating hundreds of billions in revenue and profits. Part of the reason is that I view any news coming out of China -- particularly as it relates to AI -- with a healthy amount of skepticism. China is America's great geopolitical rival, and propaganda and misinformation are used by great powers to further their ends. Moreover, since the U.S. government placed export restrictions on certain Nvidia GPUs, there are various parties who may want to obscure which GPUs were used to train the DeepSeek model. What's more, an analysis from the research company SemiAnalysis noted that the cost to train the DeepSeek model was likely $500 million, almost 100 times more than what its designers reported. Therefore, in my view, there's no good reason to forget Nvidia stock right now. Nevertheless, some investors may want to trim back their holdings or simply move on. And in that case, my suggestion would be to check out Palantir Technologies (PLTR -0.39%). For those who follow AI stocks closely, Palantir is one of the big names. However, for the average investor, it is far from an iconic company. Yet it's already a corporate giant. As of this writing, Palantir's market cap is $241 billion. That makes it more valuable than McDonald's, AT&T, and American Express, to name just three legendary U.S. companies. Palantir is now the 32nd-largest American company overall, and it has all happened in a flash. A year ago, it wasn't even part of the S&P 500. So, why is Palantir stock riding such a hot streak? The answer is that it aims to do something Microsoft did in the 1980s: become the operating system of the next technological revolution. The company operates an AI-powered platform that can analyze an organization's data and drive impressive efficiency. It takes the promise and power of AI hardware and puts it to practical use. As a result, its fundamentals are near-perfect. In its most recent quarter (ending on Dec. 31, 2024), Palantir blew away expectations, highlighted by the following: The company continues to bring in new clients that are eager to use its AI platform. In turn, management provided upbeat guidance that came in well ahead of expectations, fueling another big increase in Palantir's stock. Shares are up more than 500% over the last 12 months.

Prediction: Nvidia Stock Is Going to Soar After Feb. 26 | The Motley Fool

Nvidia (NVDA 1.71%) has gotten off to a bad start on the stock market in 2025, losing more than 10% of its value as of this writing, with Chinese artificial intelligence (AI) start-up DeepSeek's launch of a low-cost but capable AI model playing a key role in the semiconductor giant's troubles. When DeepSeek claimed that it spent just $6 million to train its R1 reasoning model that's capable of competing with OpenAI's o1 reasoning model, AI stocks in the U.S. took a big beating. Nvidia stock was one of the biggest victims of the sell-off, dropping 17% on Jan. 27 after it emerged that DeepSeek overtook ChatGPT's downloads on the Apple app store in the U.S. DeepSeek's low-cost model sparked concerns about major cloud computing companies and governments reducing their demand for the AI chips Nvidia sells. However, a closer look at recent developments in the AI space suggests that the spending on AI chips could continue to head higher, opening the possibility of Nvidia stock regaining its mojo once it releases its fiscal 2025 fourth-quarter results on Feb. 26. Let's look at why Nvidia could offer a bright update about the state of AI spending later this month along with its quarterly report. Over the last few years, tech giants and governments around the world have poured a lot of money into the development of AI infrastructure, and President Donald Trump gave AI spending prospects a massive boost last month. On Tuesday, Jan. 21, Trump announced at the White House that SoftBank, OpenAI, and Oracle (ORCL -0.42%) are forming a joint venture that plans to invest $100 billion in AI infrastructure. The joint venture, known as Stargate, is eventually planning to spend up to a whopping $500 billion on building AI infrastructure in the U.S. over the next four years. Stargate's first AI data center is already under construction in Texas, according to Oracle chairman Larry Ellison. The joint venture is expected to construct 20 data centers, creating an estimated 100,000 jobs. In a post announcing the Stargate project, OpenAI pointed out that the initial funding will be provided by SoftBank, OpenAI, Oracle, and Abu Dhabi's AI-focused investment company, MGX. The post further highlighted that Nvidia is going to be among the "initial technology partners" in Stargate. Nvidia has been at the forefront of the AI revolution with its powerful graphics processing units (GPUs) based on the Ampere architecture that helped OpenAI train ChatGPT. It has kept pushing the envelope in the AI accelerator market, churning out more powerful chips in the past three years based on its Hopper and Blackwell architectures. This explains why Nvidia has maintained a solid grip on the AI chip market with an estimated share of 90%. Given that Nvidia has created a technology advantage over rivals in the AI chip market, it could remain the dominant force in this space. As Nvidia's GPUs are the basic building blocks of AI data centers given their ability to perform massive calculations simultaneously, allowing companies to train and deploy AI models quickly, Stargate's ambitious investment plan should ideally help improve the chipmaker's addressable market. For instance, Oracle has been relying on Nvidia's GPUs to create AI infrastructure to rent out to customers so that they can train AI models in the cloud. In September last year, Ellison remarked that one of Oracle's largest data centers "is 800 megawatts, and it will contain acres of NVIDIA GP clusters able to train the world's largest AI models." This was followed by a remark from Oracle CEO Safra Catz on the December 2024 earnings conference call that the company "delivered the world's largest and fastest AI supercomputer, scaling up to 65,000 Nvidia H200 GPUs." Oracle is planning to deploy an additional 35 cloud regions around the globe in addition to the 17 it already has. It won't be surprising to see the company's appetite for Nvidia's GPUs increasing. More importantly, as Nvidia has been working with its supply chain partners to increase the output of its AI GPUs in 2025, it should be in a position to meet the higher demand for its chips that's likely to arise following Stargate. Meanwhile, the likes of Meta Platforms and Microsoft aren't going to curtail their spending on AI infrastructure following DeepSeek's breakthrough. Both companies believe that heavy AI investments are required to support the growing demand for AI applications, thanks to the potential arrival of more efficient models as demonstrated by DeepSeek. Dutch semiconductor equipment giant ASML suggested something similar after the company witnessed solid growth in orders and received way more bookings than Wall Street was anticipating. All this suggests that the AI spending environment could remain robust, and that could help Nvidia deliver solid results and guidance later this month. Analysts are currently expecting Nvidia's revenue in fiscal 2026 (which has just begun) to increase 52% to just over $196 billion, followed by a 21% increase in fiscal 2027. However, expect to see those estimates head higher in light of the above discussion, paving the way for more upside in Nvidia stock. It is worth noting that Nvidia's 12-month price target of $175, according to 66 analysts covering the stock, points toward 46% gains from current levels. Nvidia's revenue estimates for both fiscal years 2026 and 2027 have jumped higher of late, a trend that could continue thanks to continued investments in AI. As a result, Nvidia's price target could also witness upward revisions. So, investors who have been on the sidelines and are wondering if it is a good idea to buy shares of Nvidia following the stellar returns that the stock has delivered in the past couple of years can consider buying it right away as it can regain its mojo. The stock's forward earnings multiple of 23 is very attractive considering that the tech-laden Nasdaq-100 index has a forward earnings multiple of 27. That's why buying Nvidia right now could turn out to be a smart move as its healthy earnings growth momentum is likely to continue.

1 Artificial Intelligence (AI) Chip Stock to Buy the Dip Right Now (Hint: It's Not Nvidia) | The Motley Fool

Over the past year, a number of semiconductor stocks have witnessed meteoric gains thanks to ongoing euphoria surrounding artificial intelligence (AI). The share prices of Nvidia, Taiwan Semiconductor Manufacturing, and Broadcom have all risen approximately 80% over the last 12 months -- handily outperforming both the S&P 500 and Nasdaq Composite. But one name in the chip realm that just can't seem to appeal to investors is Advanced Micro Devices (AMD -2.36%), whose shares have dropped 36% in the last year. Below, I'm going to analyze AMD's fourth-quarter and full-year 2024 earnings report. While the results can be a little challenging to navigate, I see a lot of potential in AMD's long-run roadmap. I'll explain how the company is making notable inroads in the AI realm, and make the case for why now looks like a great opportunity to buy the dip in AMD stock. I think the surface-level explanation as to why stocks such as Nvidia or Taiwan Semi consistently climbed higher over the last year is because each company's business results are accelerating across the board. That's generally a good recipe to garner enthusiasm from investors. Conversely, AMD's financial profile has been tougher to gauge. Among its four operating segments, two are growing in spectacular fashion... and two are decelerating at alarming rates. For this reason, AMD's overall growth rates look quite mundane compared to its chip peers. For all of 2024, AMD's revenue increased by 24% while net income rose 42%. It's a respectable picture, but when you consider that the gaming and embedded segments declined by 59% and 13%, respectively, it's hard not to wonder what AMD would look like if all of its major businesses were in a position of strength. While I understand that point of view, I think it's shortsighted. Remember, the semiconductor industry is quite cyclical. For this reason, it's not uncommon for a company such as AMD to witness ebbs and flows across certain operating categories. To me, the real concerns should be over whether or not the company's long-term narrative looks robust or weak. The area that I personally focus on most regarding AMD is its data center business. This is the part of the company that supplied advanced chipware known as graphics processing units (GPUs) to data centers. For most of the last two years, Nvidia has been the primary player in town when it comes to data center GPUs. However, a closer analysis of AMD's financial results suggests the company is making significant headway in its own right. During 2024, AMD's data center business generated $12.6 billion in sales -- rising 94% year over year. Even better? Operating profits in this unit grew almost threefold. To put this into perspective, AMD's data center business only grew by 7% year over year in 2023 and operating profits actually dropped by more than 30%. This is quite a turnaround in just one year. So, what changed? AMD released its MI300X accelerators in December 2023. This product has served as a pivotal shift for AMD, as the company now has a GPU that can compete more directly with those supplied by Nvidia -- and all at a reduced cost. Over the last year, AMD has made inroads with the likes of Microsoft, Meta Platforms, and Oracle, supplying each of these companies with MI300 chipware in addition to their existing Nvidia hardware stack. Recent comments made by leadership from Microsoft and Meta heavily imply that investment in AI infrastructure is very much planned to continue, and I see these commitments as a positive force for AMD. Right now, AMD trades at a forward price-to-earnings (P/E) multiple of 24, which is essentially the same as the average forward P/E of the S&P 500. I see the parity between these multiples as a suggestion that investors view a position in AMD as carrying the same upside as simply dumping your money into an index tracking the S&P 500. In light of the myriad expanding markets underneath the AI umbrella, combined with the importance chips play in powering these applications, it's hard to justify an investment in AMD as being on par with the broader market. When you consider just how quickly the company has scaled its data center business, I become even more bullish on AMD's potential to disrupt players like Nvidia down the road. I see now as a great opportunity to buy the dip, hand over fist, in AMD stock and prepare to hold for the long run.

2 Artificial Intelligence (AI) Stocks to Buy Like There's No Tomorrow | The Motley Fool

Investors looking for the best artificial intelligence (AI) stocks might want to look at the companies Wall Street is overlooking right now. Some tech leaders in hardware and software are experiencing strong demand for their technology but, for whatever reason, are not seeing validation yet in their share price. More growth from these businesses will solve that problem. Here are two AI stocks that could deliver explosive returns to investors over the next few years. At the time of this writing, Advanced Micro Devices (AMD -2.36%) stock is down 8% after it reported fourth-quarter earnings results. AMD is one of the leading suppliers of graphics processing units (GPUs), which are used for AI training, and it is also gaining market share against Intel in the consumer market. Both markets should continue to deliver strong growth for AMD in 2025, making the stock's recent dip a great buying opportunity. AMD finished 2024 on a strong note, with Q4 revenue and adjusted earnings up 24% and 42%, respectively, year over year. But Wall Street might have been looking for more specific guidance relating to AMD's revenue it expects from data center GPUs in 2025. There's been concern about the growth of capital spending in AI infrastructure. China's DeepSeek claims it built a state-of-the-art AI model for a low amount of money that can compete with the best models from OpenAI and other AI leaders. This prompted fears of less investment in data center AI, which brought in $5 billion in revenue for AMD last year, or 19% of its total revenue. However, these fears appear overblown. The investment required to build these large language models like DeepSeek R1 and OpenAI's ChatGPT is not comparable to the investment required to build AI systems in data centers to support enterprise needs. For example, Meta Platforms, which uses AMD's Instinct MI300X GPU in its Grand Teton AI platform, said it would spend between $60 billion to $65 billion this year, with a significant portion allocated for generative AI and other business needs. AMD expects another year of strong growth in its data center business, and this is after a year when its data center segment grew 94% over 2023. Meanwhile, AMD also reported a 58% year-over-year increase in revenue from its client segment in Q4, which includes sales of its Ryzen PC processors. AMD appears well positioned for continued momentum in the PC market after Dell announced it would offer a full lineup of commercial PCs powered by Ryzen for the first time. Investors can buy shares of AMD at an attractive forward price-to-earnings (P/E) ratio of 23 at the current $112 share price, which is a bargain for this top chip supplier. Investors interested in AI should consider stocks that are exposed to both the hardware and software opportunities. One of the best AI software stocks to consider for 2025 is C3.ai (AI -0.51%), which provides enterprise AI applications used by the U.S. military and Fortune 500 companies. C3.ai's AI models provide highly accurate results to help businesses do more with less. Organizations are finding real cost savings using its software, which creates tremendous utility value and puts the company on a solid growth trajectory. This is a relatively small business with just $346 million in trailing revenue, but it's scaling quickly. Revenue grew 29% year over year in the most recent quarter and accelerated over the last year. With a market cap of $4.4 billion, C3.ai shares are trading at 12 times sales, which is reasonable for a fast-growing software business. However, C3.ai's stock could be trading at a higher valuation if it wasn't dependent on a small number of companies for revenue. For example, its contract with Baker Hughes made up 18% of its revenue last quarter, and that contract is set to expire in June. This risk is gradually fading as C3.ai diversifies its customer base. Toward the end of 2024, Microsoft announced a five-and-a-half-year deal with C3.ai to accelerate its investment in enterprise AI. The deal makes C3.ai the preferred AI application provider on the Microsoft Azure cloud service, which could lead to significant revenue growth. The growth from this deal could also help C3.ai scale its business to improve margins and turn a profit. The stock is up 28% since C3.ai announced the deal with Microsoft. It may have room to run in 2025. The stock gives investors great exposure to the massive growth opportunity in AI software.

3 No-Brainer Artificial Intelligence (AI) Stocks to Buy Right Now

Artificial intelligence (AI) investing is still one of the prevailing themes in the markets. Investors need to have some exposure to this trend, as it has the potential to be a generation-defining technology with a similar magnitude of impact as the internet. For AI investing, my top three buys today are Nvidia (NVDA 0.90%), Taiwan Semiconductor Manufacturing (TSM -2.08%), and Meta Platforms (META 0.35%). These are major players in the AI world, and they all look like smart buys right now. Nvidia and Taiwan Semiconductor are neutral in the AI arms race Nvidia and Taiwan Semiconductor are investments on the hardware side of AI. This is a great area to invest in, as it doesn't require you to pick a winner. Because Nvidia graphics processing units (GPUs), filled with chips from Taiwan Semi, are used to train and run AI models, they are agnostic as to which AI company is winning the race. While models like OpenAI's ChatGPT or Anthropic's Claude may have been at the top of the generative AI race a month ago, DeepSeek's R1 recently emerged out of China as a worthy competitor, despite being trained at a lower cost. Regardless of which company the models originated from, they were mostly trained using Nvidia GPUs. That's an excellent position for Nvidia to be in, and it makes the company a strong buy right now, as the commitments for massive AI spending haven't changed despite DeepSeek's efficiency breakthrough. Taiwan Semiconductor is also benefiting from this massive spending, as it supplies the chips that go into Nvidia GPUs as well as other AI accelerator devices that compete against Nvidia. Its management team sees incredibly strong tailwinds from this industry, and it expects AI-related revenue to grow at a mid-40% compound annual growth rate (CAGR) for the next five years. That's incredible growth and speaks to the strength that companies like Nvidia will also have over that time frame. Although many investors are worried about DeepSeek's efficiency gains with its model, they shouldn't be. Making models cheaper to run increases their use case, which requires even more computing hardware to fill the demand. This places Nvidia and Taiwan Semiconductor in a great position, making them strong buys now, especially when you consider where they're trading. Thanks to the weakness caused by DeepSeek, these two stocks are trading for very attractive valuations. NVDA PE Ratio (Forward) data by YCharts From a forward price-to-earnings (P/E) ratio standpoint, each is attractively priced, especially considering they are expected to grow at an above-market average pace. For comparison, the S&P 500 trades for 22.3 times forward earnings, so these companies only have a slight premium to the market despite fantastic growth. Both Nvidia and Taiwan Semi are strong neutral investments in the AI arms race, and right now is a great time to scoop them up. Meta Platforms uses its primary business to fund AI investments Meta Platforms is more of an application play on AI, but that's not the reason it's on this list. Meta's base business, advertising on its social media sites, is incredibly strong. In the fourth quarter, Meta's "Family of Apps" revenue increased by 21% and produced an unbelievable 60% operating profit margin. By itself, that could be considered the greatest business in the world, but Meta is using some of those profits to fund its AI investments. Meta plans to spend $60 billion to $65 billion on capital expenditures this year, mostly focusing on computing power to meet the demand for its AI model. While some investors may view this as a sideshow to the main business, Meta appears incredibly close to making a massive breakthrough. CEO Mark Zuckerberg thinks that 2025 will be the year that it becomes possible to make an engineering AI agent with the same problem-solving capability as a mid-level engineer. That would be a massive leap forward and greatly multiply the engineering power that Meta could tap. If it can win the race to that technology, Meta's AI model could become far and away the most capable, leading many companies to deploy Meta's model. Regardless of what happens with AI, Meta still has a very powerful base business to lean on, which makes it a safe AI investment pick. Throw in the fact that the stock trades at 28 times forward earnings, and it has become a no-brainer AI stock to buy right now.

Why Nvidia Stock Lost 11% in January

Shares of Nvidia (NVDA 1.65%) suffered a double-digit decline in January, primarily due to the threat from Chinese artificial intelligence (AI) start-up DeepSeek. AI stocks plunged on Jan. 27 as investors reacted to the new chatbot DeepSeek R1 and DeepSeek's 22-page research paper that explained the engineering and technology behind the low-cost, open-source AI model. Among other things, DeepSeek claimed that it cost just $5.5 million to train the model, a tiny fraction of the billions that Nvidia's customers have paid for the components that run AI chatbots like ChatGPT. According to data from S&P Global Market Intelligence, the stock finished the month down 11%. As you can see from the chart below, Nvidia was in the green for most of the month until the DeepSeek news sank the stock. Nvidia stock dropped 17% on Monday, Jan. 27 in an unprecedented bloodbath in the AI sector. In fact, it was the worst single-day dollar-value loss for a single stock in history, as Nvidia gave up roughly $600 billion in market cap. The stock initially recouped some of those losses, but as of Feb. 3, it was trading below its closing price on Jan. 27 in part due to fears around tariffs. With the sell-off in Nvidia stock, investors are betting that DeepSeek's much cheaper architecture could dramatically change the economics across the industry, either causing demand for Nvidia's state-of-the-art components to fall or prices to crash as, according to that argument, there's no need to spend billions to do what DeepSeek could do for millions. It's still too early to know what the long-term impact of DeepSeek is, and there is some debate over how much of an advance its technology is. OpenAI accused the company of "distilling" its model, essentially using it to train its own model, meaning its work wasn't original. An Nvidia spokesperson did give DeepSeek credit for the achievement, calling it "an excellent AI advancement." Is Nvidia a buy? Some analysts are skeptical that DeepSeek will significantly alter demand for Nvidia's chips or the current path in AI, noting that most American companies won't want to give their data to a Chinese start-up. However, the model is already being embraced in some corners. It's now available on Microsoft Azure, and Meta Platforms is seeking to apply DeepSeek's advances to its own AI models. At this point, it's too early to say what the long-term impact from DeepSeek is, but Nvidia is a resilient and adaptable company, and it can adjust to maintain its leadership in AI chips. Additionally, DeepSeek could accelerate demand for AI by making the technology cheaper. Overall, it's a mistake to write off Nvidia here, and the chip titan could be a beneficiary from the DeepSeek disruption in the long run.

3 Top Artificial Intelligence Stocks to Buy Right Now | The Motley Fool

Artificial intelligence (AI) appears as if it could be one of the game-changing technologies of this generation. Many of the leading technology companies in the world are investing heavily in the technology, as they race to take advantage of what many are calling a once-in-a-generation opportunity with AI. Let's look at three AI stocks that investors can buy right now. If there was any thought that major technology companies would slow down their AI infrastructure spending in the wake of Chinese AI start-up DeekSeek's claims of building an AI model for under $6 million, that just isn't the case. In fact, AI infrastructure spending is only skyrocketing. The three big cloud computing companies -- Amazon, Microsoft, and Alphabet -- announced they will invest a combined $255 billion in capital expenditures this year, largely directed at AI infrastructure. Meta Platforms will spend between $60 billion to $65 billion on capex largely related to AI. Amazon said that as per-unit costs for infrastructure come down, it is likely to lead to more overall spending. Nvidia (NVDA 0.90%) remains the best way to play the AI infrastructure trend. Its graphic processing units (GPUs) are the main chips used to provide the computing power to train large language models (LLMs) and run AI inference. It has an approximate 90% market share in the GPU space, largely stemming from the wide moat it has created with its CUDA software platform. The company created this platform long ago to allow customers the ability to program its chips for purposes beyond their original function: to speed up graphics rendering in video games. In the years since, it has built CUDA X, a collection of microservices, libraries, tools, and technologies, on top of CUDA specifically designed for AI and high-performance computing. Nvidia's growth has been outstanding, with the company on track for its second straight year of triple-digit revenue growth. Meanwhile, the stock is still attractively priced with a forward-price-to-earnings (P/E) ratio of 30 times 2025 analysts' estimates and a price/earnings-to-growth (PEG) of 0.9. PEGs below 1 typically indicate a stock is undervalued. While known as the leader in customer relationship management (CRM) software, Salesforce (CRM -1.50%) is making a push into the next big phase of AI: agentic AI. The first phase of AI has really focused on generative AI, where users can create content, whether it be text, images, or video, through prompts. ChatGPT and Alphabet's Gemini app are good examples of this. Agentic AI takes it a step further, where AI agents can autonomously perform tasks to meet specific goals with little human interaction. Salesforce jumped into agentic AI with its new Agentforce solution. It offers a number of out-of-the-box AI agents that can handle various tasks such as customer service, sales and marketing, and recruiting, while it also allows its agents to be customized through low-code and no-code tools within its platform. Introduced in October, Agentforce grew quickly, with the company announcing in mid-December that it already had more than 1,000 deals in place. Meanwhile, the company forecast that it would have 1 billion agents deployed by the end of its fiscal 2026 (ending January 2026). A consumption product that costs $2 per conversation, Agentforce is a huge opportunity for the company that only becomes more valuable the better the solution becomes. Trading at a forward P/E of 29 times next year's analyst estimates, the stock is cheap. While it's been one of the hottest stocks over the past year, up about 690%, AppLovin (APP -1.29%) still trades at an attractive value, with a forward P/E of 49 times and a PEG under 3 times. AppLovin operates an adtech platform that gaming apps use to attract and better monetize users. It also owns a portfolio of some legacy gaming apps as well. The company's growth skyrocketed since the launch of its AI-powered Axon-2 adtech solution in the summer of 2023. This includes 39% overall revenue growth last quarter and 66% from its software platform segment. At the same time, its gross margins are quickly expanding, including a 820-basis point year-over-year jump to 77.5% last quarter. So not only is AppLovin growing its revenue quickly, but its expanding gross margins mean more of the revenue it generates is dropping to the bottom line as profits as well. The company thinks that it can continue to grow its gaming adtech business by 20% to 30% a year just from gaming market growth, as well as its algorithm continuing to improve through self-learnings. However, it has been testing Axon-2 with verticals outside of gaming, and thinks that e-commerce could become a meaningful contributor this year. If Axon-2 can prove successful outside of gaming apps, AppLovin should have a lot more upside ahead, even after its already big run.

3 Top Artificial Intelligence Stocks to Buy in February | The Motley Fool

Investing in AI stocks has brought opportunity in a rapidly changing environment. The sudden appearance of DeepSeek's models, which it created with older and less advanced processors, has lowered the cost of creating powerful artificial intelligence (AI) systems. While that may democratize the field, it likely also changed the value propositions of some AI stocks. However, this does not mean that AI opportunities have disappeared. Instead, they have merely evolved, and amid this availability of lower-cost AI, investors should probably look to these three stocks in February. The increased utility of lower-cost processors should play into the hands of Advanced Micro Devices (AMD -2.36%). Nvidia has led the way with AI accelerators since the beginning, and DeepSeek also built its models with Nvidia processors, albeit less advanced ones. Nonetheless, Nvidia has competitors in that part of the market, and the leading peer is arguably AMD. Microsoft was already using AMD's MI300X processors to power AI deployments despite Nvidia's dominance. Now, with DeepSeek's breakthrough likely to fuel demand for lower-cost chips, AMD's processors are likely to attract more interest. Another draw to AMD stock may be its valuation. It has lost half its value over the last year, probably due to underperformance in the gaming and embedded segments. Moreover, its 96 price-to-earnings ratio (P/E) is less attractive as many business segments recover from an industry slump. Still, a forward P/E of 22 is an unusually low valuation for an AI chip stock, and with AI use set to increase, it may not stay that low for long. Another semiconductor stock that could benefit from democratized AI is Qualcomm (QCOM -0.80%). Like all chip companies not named Nvidia, it scrambled to get AI-enabled chips to market, launching the Snapdragon 8 Gen 3 platform in the fall of 2023. Qualcomm probably needed this catalyst. As the 5G upgrade cycle slowed down, Qualcomm's revenue fell and the company focused more on its internet-of-things (IoT), automotive, and PC chips. Its new segments came about to prepare for a world less dependent on smartphones, and now, AI could enhance the functionality of these products as well. However, the smartphone-centered handset segment remains Qualcomm's largest revenue source. With the new AI-enabled chips, it could foster the next major upgrade cycle. In fact, that cycle may have begun to materialize as revenue growth has returned to single-digit levels. Now, with DeepSeek's efforts to democratize AI, that could finally be the catalyst needed for more customers to upgrade their phones. Furthermore, Qualcomm stock is selling for around 18 times earnings, and that low valuation could serve as the catalyst that boosts its stock price growth. Greater AI use also plays into the hands of cybersecurity company SentinelOne (S 0.42%). Although it is one of many companies in the crowded but lucrative cybersecurity industry, the company stands out by operating a platform called Singularity, which management claims offers best-in-class security. Its AI platform, Purple AI, works within Singularity to automate and simplify security processes. Thanks to its AI, it can understand natural language. Such AI-related functions can help it stand out among competitors. Moreover, thanks to such functions, the computer magazine CRN declared it the cloud security product of the year, while Gartner praised it for its endpoint protection. SentinelOne is not yet profitable. This means investors cannot assess its valuation through a P/E ratio, though analysts expect positive earnings in the foreseeable future. Furthermore, with a price-to-sales ratio (P/S) of just under 10, it is a cheaper stock than top competitors such as CrowdStrike, Zscaler, and Palo Alto Networks. Ultimately, SentinelOne offers a competitive advantage to shareholders through AI. With a low sales multiple and the company nearing profitability, now might be an excellent time to start adding shares.

Should You Buy Nvidia Before Feb. 26? The Evidence Is Piling Up, and Here's What It Says. | The Motley Fool

Nvidia (NVDA -2.84%) stock soared 171% last year for the best performance in the Dow Jones Industrial Average, which it recently joined. The year was fantastic for the artificial intelligence (AI) chip giant. It entered this famous benchmark, reported record revenue, and readied the release of its new game-changing Blackwell architecture. In recent days, though, Nvidia's momentum has screeched to a halt as the stock lost about 15% over the past five trading sessions. The reason for the drop? Chinese start-up DeepSeek announced it had trained its AI model for a fraction of the amount big U.S. tech companies have been investing. The idea is that maybe these Nvidia customers have been spending too much, and following the DeepSeek news, they may adjust their strategies and cut their investments. Meanwhile, Nvidia is heading for its next big catalyst on Feb. 26, so you may be wondering if you should buy the stock before that date and potentially benefit from near-term and long-term gains. The evidence is piling up and here's what it shows. First, let's take a quick look at Nvidia's meteoric rise to fame in the AI market. The company historically was a top seller of graphics processing units (GPUs) to the video gaming industry, but as it became clear that the GPU could excel in other businesses, it created the CUDA parallel computing platform to help make that a reality. Today, though Nvidia continues to serve the video game market, the company's biggest business is AI. It's data center unit makes up 87% of today's revenue, and revenue has reached records -- growing in the double-digits or triple-digits -- quarter after quarter. This is not only due to the GPUs that power the crucial steps of training and inferencing of models, but also to the company's entire ecosystem of AI products and services, from networking options to software. All of this has helped supercharge Nvidia's stock performance as investors sought to get in on this high-growth player that's been leading in a high-growth market. Now let's consider the catalyst that's right around the corner: Nvidia is set to report fiscal fourth-quarter and full-year 2025 earnings on Feb. 26. Earnings reports generally trigger some stock movement, based on whether the company reports good or bad news. In some cases, the company can deliver a positive report, but investors still may sell some shares to lock in their profits. So it's impossible to predict with 100% certainty what a stock will do following an earnings report. Evidence before us right now offers some clues about direction in the weeks and months to come and could help investors make a smart decision. The DeepSeek news may have initially seemed negative for Nvidia, but it's unlikely to change anything for the tech powerhouse. The company's latest chip has proven it's the fastest and most efficient -- and its top customers want the best for their projects. As a result, I'd be very surprised if they did an about-face and cut spending on premium chips. In recent days, experts have cast doubts on the validity of DeepSeek's cost estimate. Analyst firm SemiAnalysis wrote that the GPU investment may have totaled more than $500 million -- a far cry from the less than $6 million DeepSeek announced. So I don't see the DeepSeek news as a long-term headwind. On top of this, Nvidia has reached a big moment right now. The company is launching its new Blackwell architecture, and in this quarterly report on Feb. 26 will announce the first Blackwell revenue figures. Last quarter, it predicted this would be several billion dollars, suggesting this new platform will be a major revenue driver for the company in the months to come. It's also important to keep in mind that the general environment for AI is positive right now. The U.S. government and OpenAI recently announced a $500 billion project to build out infrastructure in the country and named Nvidia as a key partner. This is against the backdrop of an already growing market. Analysts forecast today's $200 billion AI market may reach more than $1 trillion by the end of the decade. All of this shows us Nvidia's revenue growth opportunity is far from over. So, should you buy Nvidia stock before the upcoming earnings report? The evidence I've talked about so far and one more element offer an answer. Today, after the recent declines, Nvidia stock is trading at 27x forward earnings estimates, its lowest level in a year, and it looks dirt cheap, considering all of the positive points I've mentioned above. The answer, therefore, is yes. Right now, before Feb. 26, is a great time to get in on this top AI stock that could soar in the near term, but more importantly, over the long run.

The "Dean of Valuation" Says Nvidia Stock Could Plunge by 31%. Here's My Contrarian Take on Why DeepSeek Could Fuel It to New Highs, Instead. | The Motley Fool

Finance professor Aswath Damodaran just slapped a $78 price target on Nvidia stock -- implying over 30% downside from current levels. Aswath Damodaran is an accomplished professor at New York University's Stern School of Business. In particular, Damodaran specializes in valuation -- having written several books on the topic, and often publishing his models and forecasts to the public. Over the years, Damodaran has become known as the "Dean of Valuation" among financial journalists and media personalities. Last week, Damodaran published a new forecast around Nvidia (NVDA 0.90%) -- calling for a 37% drop in share price from current levels (as of Feb. 5). Below, I'm going to detail Damodaran's logic to help explain why he's calling for such a drop. From there, I'll give my take on why I'm not fully aligned with his bearish forecast. By now, you're probably familiar with AI's newest talking point -- namely, a Chinese start-up called DeepSeek. DeepSeek is the latest company to emerge in the AI realm, claiming it's developed game-changing applications for a fraction of the cost used to build mainstream models from OpenAI or Anthropic. In Damodaran's analysis, he states that DeepSeek has "changed the AI story" that will "create a bifurcated AI market, with a segment of low-grade AI products that is commoditized and highly competitive and a segment of premium products." On the surface, I understand what Damodaran is getting at. If (key word "If") DeepSeek has built a platform on par with or superior to existing AI models and did so with less costly infrastructure, Nvidia's position as the king of the chip realm would appear jeopardized. To me, the above contention is still more of a theory than anything. It seems that each hour, more stories are publishing about DeepSeek -- many of which are now alleging the start-up was funded with much more than the initial $6 million it claimed. If that's the case, then Nvidia has less to worry about. But in a world where DeepSeek was built for far less than funding compared to what was plowed into OpenAI and its cohorts, I still don't see such a notion as a bad thing for Nvidia. The reason actually lines up with Damodaran's point of chipware becoming commoditized. Right now, it's well known that many of Nvidia's largest customers include cloud hyperscalers such as Microsoft, Alphabet, and Amazon. Moreover, big tech giants such as Meta Platforms and Tesla are also some of Nvidia's biggest adopters. What is also known is that many of these companies are investing heavily into internal chipware and working with lower-cost providers, such as Advanced Micro Devices. The rationale behind these investments is not that Nvidia's chips are falling short of expectations, but rather because these businesses are seeking ways to diversify their own platforms and create cost-saving opportunities in the process. As more chips enter the market, these products would become somewhat commoditized anyway. In my mind, DeepSeek doesn't change the narrative of chips becoming a commodity hardware product at all -- it's reinforcing the idea. The one area that I will concede looks a bit blurry right now is Nvidia's growth trajectory. I think DeepSeek's arrival is causing investors to consider the inconvenient (but likely) idea that Nvidia's growth could start decelerating at a meaningful pace someday. While such concerns are legitimate, big tech still appears to be first in line at Nvidia's doorstep for now. Recent comments from Meta CEO Mark Zuckerberg as well as comments from Microsoft's leadership both indicate that investment in AI infrastructure is going to continue for the foreseeable future. It's difficult to determine precisely how much of that spending will be designated for Nvidia, but I am highly confident that the leading chip manufacturer will remain central to the world's top AI businesses in the future. What's ironic is that even while Nvidia's largest customers have publicly stated that their capital expenditure (capex) budgets remain robust, shares are still selling off. NVDA data by YCharts. In all honesty, I wouldn't be surprised if Nvidia stock continues experiencing drops until the company reports earnings on Feb. 26. By then, I think investors and analysts will have sufficient detail that could signal what AI spend is going to look like across both near- and long-term horizons. My contrarian take is that during Nvidia's fourth-quarter call, the company's leadership will drive one point above all else: Demand for its chips -- including the latest and most expensive architectures -- remains strong and should continue that way for some time. As such, I wouldn't be surprised to see shares of Nvidia begin turning around in an epic fashion. For now, I see dips in Nvidia stock as incredible buying opportunities and think the stock will soar much higher from where it is today.

Should You Buy Advanced Micro Devices (AMD) Stock After Its 49% Drop? | The Motley Fool

Nvidia makes the most advanced graphics processing units (GPUs) for data centers, which are used to develop artificial intelligence (AI) models. The company has benefited from a powerful first-mover advantage, capturing the lion's share of the market and adding trillions of dollars to its market capitalization in the process. AMD is quickly catching up to Nvidia (technologically speaking) in the data center business, but it's also a leader in another area of the AI semiconductor race that could become a major source of growth. So, does the 49% decline for AMD stock represent the ultimate long-term buying opportunity? Toward the end of 2023, AMD launched its MI300X data center GPU for AI workloads, which was designed to compete with Nvidia's flagship H100. It attracted many of Nvidia's top customers, including Meta Platforms and Microsoft, marking a highly successful launch into the AI GPU space. AMD followed the MI300X with the MI325X last year, which was designed to match Nvidia's newer H200. According to AMD, some customers are yielding significant performance and cost advantages by using the MI325X over competing GPUs, a positive sign for the company's quest to capture market share. That brings us to the MI350X, which will be AMD's most powerful GPU to date thanks to its new Compute DNA (CDNA) 4 architecture. It's expected to deliver a performance increase of 35 times compared to CDNA 3 chips like the MI300X, so it should rival Nvidia's new Blackwell lineup, which is currently the gold standard for AI. AMD was planning to launch the MI350 series in the second half of 2025, but it's ahead of schedule, and customer samples are expected to be shipped this quarter with production ramping up into midyear. But the data center won't be the heart of the AI boom forever. Companies like China-based DeepSeek are deploying highly efficient training and inference techniques to deliver globally competitive AI models using a fraction of the computing capacity (and financial resources) of industry leaders like OpenAI. That means computers, smartphones, and other devices could soon run AI software independent of external data centers. AMD's Ryzen AI 300 Series chips for personal computers (PCs) were bred for exactly that purpose. They are currently the most powerful and best-selling chips in this segment of the market. The company expects PC manufacturers like Microsoft, HP, Lenovo, and Asus to launch over 100 commercial hardware platforms using Ryzen AI 300 Series chips during 2025. The ability to process AI software on-device will create a much faster user experience, and it means people can tap into the power of this technology anywhere, even without an internet connection. Eventually, every computer and device will have the ability to run AI workloads, so AMD is on the cusp of a multiyear opportunity. AMD had a record year in 2024. It generated $25.8 billion in revenue, and while that represented a modest growth rate of just 14% compared to the prior year, the real story lies beneath the surface. Data center revenue soared 94% for the year to $12.6 billion, which included over $5 billion in GPU sales alone. CEO Lisa Su went into 2024 expecting to see just $2 billion of GPU sales, so the company far exceeded her initial expectations. Even better, she believes GPU revenue will scale into the tens of billions of dollars annually over the next few years. The client segment -- which is home to the Ryzen AI chips -- generated $7.0 billion in revenue during 2024, up 52% year over year. Su believes this business unit will grow faster than the overall market during 2025, which suggests AMD will be taking even more market share from its competitors. Why was AMD's overall top-line growth so slow compared to its data center and client segments? Because the company's other two business units, gaming and embedded, delivered annual revenue declines. The gaming segment generated $2.6 billion in revenue for the year, down 58%. Customers have been waiting for AMD's next-generation Radeon 9070 gaming GPU, which will go on sale in March and should spark a gradual recovery in this segment's sales. The embedded segment generated $3.6 billion in revenue, down 33%, due to softness in some of AMD's biggest markets like industrials and communications. But make no mistake -- although the gaming and embedded segments have been a drag on AMD's results, investors should remain focused on the performance of the company's AI businesses in the data center and client segments because that's where most long-term growth is likely to come from. AMD stock sank last week following the release of its full-year 2024 results, partly because the company forecast a 7% sequential decline in its revenue for the first quarter of 2025, citing seasonality (the chip business is inherently cyclical). However, management still expects strong growth in its AI-powered data center and client businesses during the quarter, so it wasn't all bad news. The stock is now sitting near its 52-week low, and its valuation is starting to look very attractive. The company delivered $3.31 in adjusted earnings per share (EPS) during 2024, placing the stock at a price-to-earnings ratio (P/E) of 32.5. Therefore, it's significantly cheaper than Nvidia, which trades at a P/E of 50.8. Plus, Wall Street's consensus estimate (per Yahoo! Finance) suggests the company's EPS will soar 43% to $4.75 this year, giving it a forward P/E of just 22.6. In other words, the stock will have to climb some 40% this year just to maintain its current P/E multiple. However, given the huge margin by which AMD beat Lisa Su's original forecast for GPU sales in 2024, combined with her expectations for future sales, there is every chance the company could deliver even better results in 2025 than Wall Street is anticipating. Nevertheless, the AI revolution is still in its early stages, especially when it comes to computers and devices. Therefore, although the 49% dip in AMD stock looks like a great buying opportunity, investors should maintain a long-term position of five years or more to maximize their chances of yielding a positive return.

1 Data Center Stock to Buy on the DeepSeek Dip (Hint: It's Not Nvidia) | The Motley Fool

For the last week, the financial world finally had something to talk about other than Nvidia... well, sort of. By now, you've probably heard a lot of chatter about a Chinese artificial intelligence (AI) start-up called DeepSeek. DeepSeek built a competing large language model (LLM) to OpenAI's ChatGPT, but claims that it trained the model with old Nvidia processors that aren't widely used anymore. This news has shellshocked technologists and analysts across Wall Street because if DeepSeek's methods of building highly capable AI can be done using legacy hardware, Nvidia's newest architectures could be rendered obsolete. Unsurprisingly, the DeepSeek narrative has served as a jarring and sobering moment for AI enthusiasts who have been hitting the buy button on repeat for much of the last two years. Below, I'm going to make the case for why the ongoing sell-off among AI stocks could be a unique buying opportunity, depending on what companies you're looking at. Moreover, I'll make the case for why a little-known data center stock called Nebius Group (NBIS -1.65%) is a particularly compelling opportunity at the moment. It's important to note that the panic selling that's dominated the technology sector over the last several days is rooted in the idea that demand for Nvidia's latest graphics processing units (GPU) could stall. While there is merit to the notion that technology enterprises will normalize their capital expenditure (capex) budgets, I think some recent comments out of big tech can put these fears to rest. Some members of the "Magnificent Seven" recently reported earnings for the full calendar year 2024, and during the earnings calls management dropped numerous breadcrumbs on their AI roadmaps. Let's dig into what known Nvidia customers such as Microsoft, Tesla, and Meta Platforms had to say. My interpretation from big tech's commentary is that some companies may not be required to invest as much into infrastructure this year. While this looks look bad news for Nvidia on the surface, I think it actually makes sense. After all, at some point the billions of dollars that big tech has already shelled out should start to bear fruit. In other words, I actually think it would be alarming if capex budgets continued to rise consistently in a linear fashion. Nvidia is actually an investor in Nebius; hence, the two AI companies have a close relationship. Nebius plans to break ground on a GPU cluster in Kansas City, MO, this quarter, which will be comprised of "primarily NVIDIA Hopper GPUs in the initial phase" and be augmented with Nvidia's newest architecture, dubbed Blackwell, later this year. On top of that, Nebius is also building out data centers in Finland and Paris that are equipped with a combination of Nvidia's H100, H200, and Blackwell GPUs. The chart below shows the price action between Nvidia and Nebius so far in 2025. The glaring commonality between the two stocks is that they both took a nosedive as the exact same time -- namely, when DeepSeek came into the spotlight. The nuance from the comments made by leaders at big tech is that capex spend shouldn't decline in terms on absolute dollars. What they are saying is that the growth of their spend may slow down, but these companies still plan on spending significantly on infrastructure. This is important because data center companies such as Nebius work closely with Nvidia. As I outlined above, Nebius' services are already in high demand -- and Nvidia appears to be at the root of these dynamics. While capex habits are going to remain in flux from AI's biggest players, the subtle theme here is that Nvidia's chipsets are still going to be a primary feature. So long as this is the case, I see Nebius continuing to benefit. Following the precipitous decline in Nvidia, Wedbush Securities analyst and longtime technology sector bull Dan Ives called the moment a "golden" opportunity to buy the dip. I agree with Ives, and would take his comments a step further and encourage investors to consider the dip in adjacent opportunities such as data centers. To me, Nebius is still well-positioned for the long run and shares look tempting given their sharp declines.

Palantir's CEO Just Said This About DeepSeek. Here's What It Could Mean for Nvidia Investors. | The Motley Fool

Palantir CEO Alex Karp recently shared some interesting thoughts on the DeepSeek development. Alex Karp is a PhD., technologist, and philosopher. He's also the CEO of artificial intelligence (AI) software company Palantir Technologies -- and he often explains sophisticated and complicated ideas in an extremely digestible format. Recently, Karp sat down for an interview and gave his honest take on AI's newest darling, a Chinese start-up called DeepSeek. Since DeepSeek's arrival a couple of weeks ago, tech stocks have largely fallen off a cliff. In particular, semiconductor stocks have been walloped. Below, I'll detail some of Karp's comments and explain why they're important to understand. Furthermore, I'll draw on his views to understand how DeepSeek's emergence could impact the biggest name in the chip realm, Nvidia (NVDA 0.90%). When OpenAI released ChatGPT in late 2022, many in the technology world suddenly bought into the idea that large language models (LLM) represented some type of breakthrough that would forever change the way businesses interacted. Alex Karp was not one of those people. Over the last couple of years, the Palantir CEO has consistently said that LLMs, while useful, are commoditized products. During a recent interview, Karp doubled down on this idea as it relates to the DeepSeek advancement. He proclaimed that "it's much easier than people want to believe to be the second mover." He went on to explain that DeepSeek had the luxury of training its AI models on platforms that other LLMs have been using for two years now. In a way, DeepSeek's impressive capabilities shouldn't come as too much of a surprise. Perhaps the biggest component of the DeepSeek storyline is that the company is claiming it built the model for significantly less money than ChatGPT and other well-known LLMs here in the U.S. While it's been hard to validate the accuracy of these comments, many journalists and leaders in the technology world have pushed back on the idea that something of DeepSeek's caliber could have been built for a fraction of what U.S. companies have been spending on AI development. Nevertheless, many in the investment world have entered full panic mode -- hitting the sell button on Nvidia like it's going out of style. The driving force behind Nvidia's sell-off is that if DeepSeek's claims are true, demand for Nvidia's graphics processing units (GPUs) may falter. It's unlikely that DeepSeek will suddenly disappear or that its training capabilities will somehow worsen. Karp went on to suggest that, in light of the DeepSeek development, the U.S. should "run harder, run faster" and continue its already serious investments in AI. He doesn't appear to be the only tech personality touting this idea, either. During recent earnings calls for Meta Platforms and Microsoft, both companies made it clear that capital expenditure (capex) this year remains a core focus, given high demand for their AI services. To me, DeepSeek appears to be inspiring American technology enterprises to spend even more on their AI roadmaps. Considering both of these "Magnificent Seven" members are customers of Nvidia, I see the continued investment in AI infrastructure as a major tailwind for the chipmaker. An extremely diluted way of thinking about the DeepSeek situation could be to see the product as yet another LLM -- as Karp essentially predicted would happen two years ago. So long as new LLMs emerge and existing platforms continue spending on training and inferencing compute, demand for Nvidia's processors should remain robust. I see the ongoing sell-off in Nvidia as something that's rooted in fear, as opposed to prudent judgement. More importantly, long-term investors have been presented with a rare opportunity to buy the dip in Nvidia -- a stock that's gone almost exclusively upwards for more than two years now. Although the near term could remain a bit volatile, Nvidia's long-term picture still holds up and could actually become even stronger as U.S. businesses double down on their AI infrastructure.

2 AI Stocks to Buy Before They Soar 300% and 110%, According to Certain Wall Street Analysts | The Motley Fool

Hans Mosesmann at Rosenblatt Securities recently lowered his 12-month target price on AMD to $225 per share. But that still implies 110% upside from its current share price of $107. Here's what investors should know about these artificial intelligence stocks. Palantir specializes in data analytics. Its software products help commercial and government clients integrate complex information, develop machine learning models, and surface insights. International Data Corporation recently recognized Palantir as a leader in decision intelligence software, and Forrester Research recently ranked the company as a leader in artificial intelligence (AI) platforms. Palantir reported exceptional financial results for the fourth quarter, beating estimates on the top and bottom lines. Its customer count jumped 43% to 711, and the average existing customer spent 20% more. In turn, revenue rose 36% to $828 million, the sixth consecutive acceleration, and non-GAAP earnings increased 75% to $0.14 per diluted share. Following the report, Mark Giarelli at Morningstar wrote, "Palantir's outstanding fourth-quarter results, rapid growth amid the artificial intelligence arms race, and strategic positioning in the AI-value chain further solidify our base case expectations that this company can be the next software juggernaut." Wall Street expects Palantir's adjusted earnings to increase 37% in the next four quarters. That consensus makes the current valuation of 270 times adjusted earnings look absurdly expensive. Admittedly, Palantir beat expectations in the last six quarters, and its earnings topped the consensus estimate by an average of 14% in that period. However, the stock would still look expensive even if Palantir's earnings increase twice as fast as Wall Street anticipates in the next year. So, while I believe the company will be worth more in the future, perhaps even $1 trillion, I also believe better buying opportunities will present themselves. Investors should be cautious chasing the stock at its current price. Advanced Micro Devices is a semiconductor company best known for developing Ryzen and Epyc central processing units (CPUs) and Instinct graphics processing units (GPUs) for data centers, personal computers, and gaming systems. The company also develops embedded processors across a range of end markets, including automotive driver assistance systems and industrial machine vision systems. Importantly, while Intel is still the market leader in x86 CPUs for data center servers and personal computers as measured by units, AMD has gained substantial market share in recent years. Those share gains have been driven by a combination of AMD's innovations and Intel's missteps. And analysts generally anticipate more of the same in the coming years. However, AMD has been mostly unsuccessful in its attempts to compete with Nvidia in data center GPUs, and there are two reasons: First, Nvidia consistently achieves the best scores at the MLPerf benchmarks, objective tests that measure the performance of AI systems. Second, Nvidia has a much more robust ecosystem of software development tools to help programmers build applications. AMD reported decent financial results in the fourth quarter, despite missing data center sales estimates. Total revenue rose 24% to $7.7 billion and non-GAAP earnings rose 42% to $1.09 per diluted share. Disappointingly, CEO Lisa Su said data center sales in the first half of 2025 would be comparable with the second half of 2024. However, sales growth in the data center segment should strengthen in the second half of 2025 as production of its latest Instinct MI350 GPU ramps up. Su also told analysts that data center AI products would increase from "more than $5 billion in revenue in 2024 to tens of billions of dollars of annual revenue over the coming years." Wall Street thinks AMD's adjusted earnings will grow 41% in the next four quarters. That makes the current valuation of 33 times adjusted earnings look cheap. Those figures give AMD a price-to-earnings-to-growth (PEG) ratio below 1, which is typically interpreted to mean a stock is undervalued. Comparatively, Palantir has a PEG multiple above 7. I doubt AMD shareholders will see triple-digit returns in the next 12 months, but the stock looks attractive at its current price. My only worry is that Wall Street may be overestimating earnings given that x86 server CPU sales are projected to grow 17% in 2025, while personal computer shipments are projected to increase 5%. Investors comfortable with that risk should consider buying a few shares, but I would keep the position small.

Every Nvidia Investor Should Keep an Eye on This Number

Artificial intelligence (AI) leader Nvidia (NVDA 2.21%) had a strong 2024. During the year, analysts debated how high its data center revenue could grow as it rolled out new products. Hyperscaler customers kept increasing capital spending to build out data center compute power. But things turned on a dime in January 2025 when Chinese hedge fund-owned DeepSeek dropped an AI bombshell regarding resources needed to do AI well. Rather than wondering how Nvidia's latest AI chip sales were going, some investors cared more about how to invest in DeepSeek and its claims that it created a high-performing large language model (LLM) with just $6 million in capital. The news led to an 11% decline in Nvidia stock thus far in 2025. But questions remain about DeepSeek and its claims, and investors would be smart to focus on what Nvidia says in its next earnings report (due on Feb. 26). Data centers and more Before the DeepSeek news, all eyes were on Nvidia's unprecedented revenue growth -- specifically, in its data center segment. The unsustainable rate of growth was slowing, though, and Nvidia's share price had already rocketed higher as those sales soared. If spending on generative AI infrastructure comes to a screeching halt, as some have surmised from the DeepSeek news, the quarter-over-quarter growth in Nvidia's data center revenue should quickly reverse. As seen below, it appeared to begin stabilizing at a mid-teens growth rate in the last quarter. Source: Nvidia. Note: Fiscal 2025's Q3 ended Oct. 27, 2024. That's the number I'll continue to watch to see if Nvidia's share price can recoup recent losses and more -- at least in the short term. Nvidia also has other irons in the fire for the long term. The company's auto and robotics segment will be the next area to watch. That revenue pales in comparison to the data center but could be the next impactful growth catalyst for Nvidia.

Nvidia Stock Remains Analyst's Top Pick: 'DeepSeek Selloff Is A Buying Opportunity' - NVIDIA (NASDAQ:NVDA)

Demand for Nvidia products is strong according to the analyst. NVIDIA Corporation NVDA was one of several technology stocks hit by the emergence of Chinese AI competitor DeepSeek. An analyst sees the pullback as a buying opportunity. The NVDA Analyst: Morgan Stanley analyst Joseph Moore maintains an Overweight rating on Nvidia with a $152 price target. Read Also: EXCLUSIVE: Nvidia Hardest Hit Among Mag 7 Stocks By DeepSeek, Poll Shows -- And This Stock Ranked Second The Analyst Takeaways: DeepSeek could create some headwinds for Nvidia in the longer-term, Moore said in a new investor note. "But near-term checks are firming, both Hopper and all flavors of Blackwell," Moore said. The analyst said Blackwell supply visibility is building and the desire for customers to spend is "clearly on display." "DeepSeek selloff is a buying opportunity." Nvidia is maintained as the analyst's top pick. The analyst said DeepSeek marks a "strong evolutionary upgrade in the AI space," but comes in a space where Nvidia continues to improve AI performance and will continue to do so. Nvidia could have several headwinds from the DeepSeek emergence including further export controls, a different financing environment for AI spenders and investor sentiment on the company turning negative. "While we have several reasons to believe that large cluster builds will continue, mostly because the architects of those clusters are insisting so loudly every day, the cynicism is overwhelming." Moore said confidence is building for Hopper and Blackwell and the expectation is overall positive commentary from Nvidia in the upcoming quarterly financial report. "For Nvidia's customers in cloud, the revenue algorithm remains clear - 'the more GPU's I buy, the more money I make.'" NVDA Price Action: Nvidia stock is up 2.5% to $127.92 on Thursday versus a 52-week trading range of $66.25 to $153.13. Nvidia stock is down 7.4% year-to-date in 2025, but remains up over 87% in the past year. Read Next: Does Jensen Huang Check Nvidia Stock Price Daily? Photo: Shuttestock NVDANVIDIA Corp$128.372.84%Overview Rating:Good75%Technicals Analysis1000100Financials Analysis600100WatchlistOverviewMarket News and Data brought to you by Benzinga APIs

Morgan Stanley says buy the DeepSeek dip in Nvidia, calls it top pick into earnings

The recent DeepSeek-fueled sell-off in technology stocks has made Nvidia shares ripe for the picking, according to Morgan Stanley. Analyst Joseph Moore reiterated Nvidia as a top pick and repeated an overweight rating on the stock in a Thursday note to clients. His $152 price target on the dominant maker of arthificial intelligence chips indicates roughly 22% potential upside ahead for the stock, based on Wednesday's close. "While sentiment has worsened around potential longer term risks, near term business continues to firm, Blackwell supply visibility continues to build [and] customer desire to spend is clearly on display," Moore wrote. "We remain very optimistic on how the balance of the year plays out." Nvidia shares have soared nearly 85% over the past year but took a hit after the emergence of Chinese AI startup DeepSeek, which used less-efficient Nvidia chips to create an AI model that rivaled OpenAI's ChatGPT -- but at a fraction of the cost American tech hyperscalers are committing to the AI race. DeepSeek bought 10,000 Nvidia A100 chips, first released in 2020, and two generations prior to Nvidia's current Blackwell chip, before the A100s were restricted for sale in China in late 2023, according to the Stanford University Cyper Policy Center . The tech sell-off on January 27 led Nvidia to plunge 17%, losing a record amount of market value in one day of any company in history. Nvidia, which will post earnings on Feb. 26, is now down more than 6% this year. NVDA 1Y mountain Nvidia stock performance over past year. According to Moore, DeepSeek creates some headwinds around export controls and longer-term AI investment, but near-term catalysts in the form of Blackwell and Hopper chip solutions for Nvidia remain intact. Demand remains strong for Blackwell and "very promising" signals for future demand came in CoreWeave's Tuesday announcement that it brought Nvidia's GB200 NVL72 instances to its platform, making it the first cloud service provider to make Blackwell generally available, Moore said. The analyst is also sticking by Nvidia as capital spending commentary from the company's largest customers reaffirmed their AI investment plans. Nvidia's cloud customers, for example, remain committed to buying more graphics processing units in an effort to boost revenue, he said. "For the investments that are not generating revenue today there remains an ongoing commitment to advancing the state of the art," Moore said. "Many of the architects of the largest [Artificial General Intelligence] clusters have reiterated a commitment to scaling out large training clusters with no indication that DeepSeek changes that momentum." Looking ahead, Moore believes the biggest long-term catalyst for Nvidia goes beyond AI training and taps into the company's leadership in the inference market, particularly as inference tasks become more complex. Inference refers to a process where a trained AI model applies its knowledge to new data and can make predictions or decisions based on that data. "We remain convinced that Nvidia is the biggest beneficiary of long inference workloads," he said.

These 2 Stocks Are Leading the Data Center Artificial Intelligence (AI) Trend, but Are They Buys Right Now? | The Motley Fool

Data centers are among the most significant trends in artificial intelligence (AI). In the coming years, major tech companies will spend trillions erecting them in the U.S. and internationally. New massive projects are announced so often that it's tough to keep up, but I'll try. Here are some notable recent announcements: Statista expects the data center market to rise rapidly, surpassing $600 billion before the end of this decade: Here are two companies deeply involved in the industry that look like buys now. Nvidia's fiscal 2024 was an absolute revelation. Revenue grew 126% to $61 billion on the back of incredible data center numbers. Data center sales exploded by 217% to $48 billion. As tremendous as this was, it pales compared to fiscal 2025, which ended Jan. 31. Revenue totaled $91 billion, with $80 billion from data centers, and only three quarters have been reported. Another $37.5 billion is expected in the fourth quarter of fiscal 2025, bringing total sales to $128 billion -- more than double fiscal 2024. The growth is astounding. Nvidia's high-powered graphic processing units (GPUs) are essential for AI data centers. The demand is so high that Nvidia cannot build them fast enough. Recently, there was a report that Chinese company DeepSeek built a generative AI model that rivals ChatGPT with only a couple thousand GPUs and just a few million dollars. This news sent shockwaves through the industry as investors contemplated whether this meant that big tech companies would need far fewer Nvidia chips. However, investors shouldn't abandon Nvidia over DeepSeek. Many industry experts believe DeepSeek exaggerated its claims and may actually have 50,000 Nvidia GPUs and spent $1.6 billion on them. The above mentioned shock sent the stock diving; this is an opportunity for long-term investors to purchase Nvidia for a reasonable valuation: As you can see above, the forward price-to-earnings (P/E) ratio of 26 is well under the historical average. Nvidia investors who took advantage of the drops you see above in early 2023 and 2024 were also rewarded. The DeepSeek news is interesting; however, Nvidia will still almost certainly dominate the AI industry for years to come. GPUs aren't the only hardware that populates these massive data centers. They also need infrastructure like racks, servers, liquid cooling technology, switches, etc., and Dell is one of the world's largest suppliers. Dell (DELL 0.43%) has two reporting segments: its Infrastructure Solutions Group (ISG), which supplies data centers, and a Client Solutions Group (CSG), which supplies computers, laptops, and related components to businesses and consumers. The ISG segment grew 34% last quarter (Q3 of its fiscal 2025) to $11.4 billion. Servers and networking led the way, increasing sales by 58% to $7.4 billion. Operating income also rose 41% to $1.5 billion in the segment. Notably, ISG revenue accounted for 47% of Dell's total revenue in the quarter vs. 38% in the same quarter last year. The company's data center business will soon be its dominant segment. One downside to Dell is that CSG is not experiencing the same success, primarily because of lagging consumer sales. Total CSG sales last quarter fell 1% to $12.1 billion, with consumer sales down 18% to $2 billion. Turning around the consumer business will take time. Dell hopes AI will drive an upgrade cycle, but that remains to be seen. Still, this segment is profitable, so it isn't a drag on the bottom line. Dell pays a rising dividend yielding just under 2%, with plans to raise it 10% or more through fiscal 2028. The company also plans to return 80% of its free cash flow to shareholders via dividends and stock buybacks. Free cash flow, which was $5.6 billion in fiscal 2024, should spike moving forward, driven by data center demand. Analysts are bullish on Dell, with 20 of 24 giving the stock a buy or strong buy rating and an average price target of $151 or nearly 50% above the price as of this writing. Dell's position as one of the leading infrastructure suppliers to massive data center projects makes it a compelling stock in the AI arena.

Will AMD Be the Best Artificial Intelligence (AI) Stock of 2025? | The Motley Fool

Advanced Micro Devices(AMD -2.36%) is one of the biggest names in the computing industry but has played second-fiddle to many competitors throughout its lifetime. While it was behind Intel in PC processors for many years, it's now considered a neck-and-neck competitor. However, a bigger computing trend is going on right now that's far more important than the consumer PC market: artificial intelligence (AI) computing. AMD is currently getting smoked by larger rival Nvidia, but can it mount a comeback to emerge as a top AI stock pick? AMD isn't a focused computing hardware business. It splits its revenue into four sectors: data center, client, gaming, and embedded. Each has a particular use case, but the performance from each couldn't be more different. Gaming is exactly what it sounds like, as AMD provides gaming GPUs for PCs and gaming systems like the Xbox Series X and PlayStation 5. This division is seriously struggling, with revenue falling 59% year over year to just $563 million in Q4. Embedded processors, a business AMD acquired by purchasing Xilinx, also struggled, with revenue falling 13% to $923 million. This division makes processors for specific application purposes and is optimized for lower power consumption. These divisions are dragging AMD's total growth rate down and aren't reasons to be excited about the company. However, the other two are. Client revenue, which accounts for all of the original equipment manufacturer (OEM) processors and equipment it places in PCs, was up 58% year over year to $2.3 billion. This was a big turnaround quarter for AMD, as this segment has struggled for multiple quarters in a row. But AMD's biggest and most important segment is its data center division, which competes head to head with Nvidia to supply the computing muscle necessary to train AI models. On the surface, 69% revenue growth to $3.9 billion looks great, but it missed analyst expectations by a wide margin. These analysts expected $4.14 billion in data center sales, so it wasn't a small miss. Overall, AMD's management guided for $7.5 billion in sales for the fourth quarter. With the total coming in at $7.66 billion, it exceeded its own expectations, which is what investors should concern themselves with compared to Wall Street's expectations. That didn't save the stock, as it fell more than 6% after reporting earnings and is now at its lowest stock price since late 2023. There are really no signs of AMD catching up to Nvidia in the all-important AI arms race, and the other divisions aren't enough to make up for its runner-up finish. However, a case can be made to own the stock if it provides a deep enough discount that it could be considered a value investment. Despite AMD's shortcomings and its stock price reaching a low not seen in over a year, the shares still aren't all that cheap. At 113 times trailing earnings, AMD is an incredibly expensive stock. But that valuation doesn't tell the whole story. AMD is expected to undergo massive earnings growth in 2025, as the average Wall Street analyst expected $3.31 in earnings per share (EPS) this year. That prices AMD's stock at 34 times forward earnings, which a far more reasonable price tag. However, when Nvidia is priced at 28 times forward earnings, why would you consider buying the second-place company for more? That's where I'm at with AMD stock, and I think there are far too many best-in-class investment opportunities available to concern yourself with second-fiddle players like AMD.

My Top 3 Nvidia Predictions for Feb. 26 | The Motley Fool

Nvidia (NVDA 0.90%) has become one of the most-watched stocks on the planet in recent years. That's because the company has built an empire in the key growth industry of today and tomorrow: artificial intelligence (AI). The current $200 billion AI market is forecast to reach beyond $1 trillion by the end of the decade, signaling enormous opportunity for companies that get in early and secure their dominance. And Nvidia has done just that, taking about an 80% share of the AI chip market and expanding into many other related products and services to offer customers an entire ecosystem of AI. The company already is reaping the rewards, generating revenue growth in the double or triple digits quarter after quarter -- and delivering strong profitability on sales. A company's earnings reports always are extremely important moments, offering investors the latest look at business trends, and of course, financial performance. And Nvidia has one of these big moments coming up, on Feb. 26 when it reports fiscal fourth-quarter 2025 earnings. Here are my top three predictions ahead of this much-awaited report. This quarter may not be the easiest time to score an earnings beat, and for one big reason: Nvidia is in the middle of launching a major new product, its Blackwell architecture. This product is customizable, with seven different chips, various networking options, and more -- and all this means the rollout is complex and could involve extra costs that weigh on margins. Nvidia even said its gross margin, recently in the mid-70% range, will narrow to the low-70% during the period. But even in this context, I think Nvidia may continue its record of surpassing expectations, as it's done for at least the past four consecutive quarters. During those periods, it's surpassed earnings-per-share forecasts by 5.6% to more than 11%. This is driven not only by the demand for Nvidia's AI products, but also by the company's ability to manage its costs and work efficiently. And this ability should help Nvidia maximize the benefits of the Blackwell launch -- for example, turning orders into revenue growth -- while minimizing the negative impact. In its latest earnings call, Nvidia already increased its forecast for Blackwell revenue in this quarter to be reported on Feb. 26. The average analyst estimate calls for Nvidia to report EPS of about $0.84 for the fourth quarter, and in its most recent report, Nvidia predicted revenue of $37.5 billion. But I wouldn't be surprised if Nvidia went to the upside across both measures. Nvidia stock recently dropped after Chinese start-up DeepSeek announced it had trained its model with an astonishingly low investment in compute. Investors sold off Nvidia stock on worries that other tech companies would follow DeepSeek and decrease their investment in graphics processing units (GPUs) for training. (Since, experts have questioned the DeepSeek numbers -- and consulting firm SemiAnalysis even wrote a report saying DeepSeek likely invested $500 million in GPUs, a far cry from the company's announcement of less than $6 million.) However, whether DeepSeek's numbers are accurate or not, the news gave Nvidia the opportunity to emphasize the importance of high-powered GPUs in inference, the reasoning a model must do to actually apply AI to the real world and solve problems. The point is, once models are trained, Nvidia's premium GPUs are needed to power them through their tasks. "Inference requires significant numbers of Nvidia GPUs and high-performance networking," Nvidia said in response to the DeepSeek news, suggesting the world now will need more and more of these high-powered chips. I predict that during the upcoming earnings report, Nvidia will dispel worries about the DeepSeek news and talk about how inferencing will become a key growth driver in the coming quarters. Nvidia stock has declined following that initial DeepSeek news, and it's suffered from general uncertainty regarding President Trump's tariffs and policy on chip exports to China. Though I don't think the DeepSeek achievement represents a threat, it's still too early to determine exactly how government policies will impact the tech giant. Still, it's unlikely that government decisions will sink Nvidia. The company is a worldwide leader with a solid moat, high profitability, and the innovation to keep the success story going. So even if certain decisions weigh on revenue growth, I wouldn't expect this to reach extreme proportions. That means today, trading for 27x forward earnings estimates, Nvidia looks incredibly cheap. As investors look at this valuation, and consider this along with potentially good news in the earnings report, they may see this as the perfect moment to hop on board, sending Nvidia stock soaring again.

Buy Now, thank yourself later: Wall Street analysts are betting big on these 2 AI stocks and predicts gains of 300% and 110%!

Wall Street analysts are seeing big potential in AI stocks Palantir Technologies and Advanced Micro Devices, with predictions of 300% and 110% upside, respectively. AI has been the biggest driver for the growth in the stock market lately and some Wall Street analysts see potential for two specific stocks: Palantir Technologie and Advanced Micro Devices, as per a report. Wedbush analyst Dan Ives predicts Palantir can reach a trillion-dollar valuation in the next two or three years, meaning it has a 300% upside from its current $250 billion market value, reported The Motley Fool. Meanwhile, Rosenblatt Securities analyst Hans Mosesmann lowered his 12-month target price for AMD to $225 per share, yet that still represents a 110% upside from its current $107 share price. Here's why analysts are so upbeat about these two AI stocks. Palantir, makes data analytics software to support both governmental and commercial clients. With the most impressive recent earnings reports, a growing customer base, and solid positioning in the AI value chain, analysts such as Mark Giarelli at Morningstar view Palantir as a possible future software juggernaut. According to The Motley Fool, despite the continued bull run, its current valuation is extremely high, and investors need to be very cautious about jumping in at today's prices. AMD is a semiconductor company best known for developing Ryzen and Epyc CPUs for data centres and personal computers. It also develops Instinct GPUs for data centres, gaming, and artificial intelligence applications. Though it is behind Nvidia, analysts predict sales growth in the data centre segment should strengthen in the second half of 2025 as production of its latest Instinct MI350 GPU ramps up. AMD CEO Lisa SuSu also told analysts that data centre AI products would increase from "more than $5 billion in revenue in 2024 to tens of billions of dollars of annual revenue over the coming years," as quoted by The Motley Fool. Can AMD compete with Nvidia in AI chips? While AMD has made significant progress with its CPUs and GPUs, it still lags behind Nvidia, particularly in data centre GPUs. However, analysts believe AMD's focus on data centre AI products will drive strong growth in the future. Is now a good time to invest in these AI stocks? Both Palantir and AMD have strong potential, but with Palantir's high valuation and AMD's competition with Nvidia, investors should carefully consider the timing, as per The Motley Fool. Those who are bullish on AI's long-term growth may find these stocks appealing, but it's important to keep an eye on market trends and earnings reports.

Nvidia under spotlight after DeepSeek AI bombshell; here's the critical number that every Nvidia investor must track

Nvidia's stock dropped by 11% in 2025 after Chinese AI startup DeepSeek claimed to develop a high-performing language model for only $6 million, diverting investor interests. However, investors are suggested to pay attention to Nvidia's upcoming earnings report, especially their data centre revenue, as per The Motley Fool.Nvidia had a stellar 2024, with the data centre business leading the charge. Everything changed in January 2025, when Chinese AI startup DeepSeek claimed that it had developed a high-performing large language model (LLM) for just $6 million, which is much lower than what big players like Nvidia spend. This AI bombshell shifted the focus away from Nvidia's latest AI chip sales as some investors considered DeepSeek's potential and invested in it. This led to an 11% decline in Nvidia stock thus far in 2025, as per reports. But while DeepSeek's claims have made waves, there are still plenty of questions about the startup's true impact. According to The Motley Fool, investors would be smart if they focused on Nvidia's upcoming earnings report on February 26. Before the DeepSeek news, all attention was on Nvidia's impressive revenue growth, especially in its data centre segment. However, this rapid growth had started to slow down, and Nvidia's stock had soared alongside those sales. As per The Motley Fool, if the hype around generative AI infrastructure starts to fade, as some have surmised from the DeepSeek news, the quarter-over-quarter growth in Nvidia's data centre revenue should quickly reverse. In fact, their quarter-over-quarter growth has already started to stabilize in the mid-teens range, as per last quarter's data. The key number to watch is how Nvidia's revenue from data centres continues to evolve, as per The Motley Fool. This will be a major indicator of whether the company can bounce back from its recent stock dip, according to the report. Beyond that, Nvidia's auto and robotics segment is another area investors should pay attention to, as per the report. Though smaller than the data centre business, it could be the next big growth driver for the company in the future. What caused Nvidia's stock to drop in 2025? DeepSeek's claim of developing a high-performing AI model with just $6 million in funding has shifted attention from Nvidia, which led to an 11% stock decline, as per reports. What's the most important number for Nvidia investors to watch? Investors should keep a close eye on Nvidia's data centre revenue growth in the upcoming earnings report, as it will show if the company can recover from recent losses, reported The Motley Fool.

Nvidia stock climbs in early trade recouping DeepSeek losses

Nvidia stock rise has helped the chip maker to recoup a large chunk of its losses from the last week, when it witnessed a brutal selloff due to the Chinese start-up DeepSeek.Nvidia stock witnessed an upward trend on Friday morning as the artificial-intelligence chip maker looks forward to ending the week on a solid note. The Nvidia stock was trading at $128.19 per share at 2:23 PM ET on February 7, as per the NASDAQ website. At the time of closing on Thursday, the stock remained up by 4% compared to the previous four days. This allowed it to recoup a lot of its losses from the last week, when it witnessed a brutal selloff due to the Chinese start-up DeepSeek. Adding to those gains, the share on Friday morning was up 0.8% at $129.67. Also Read : GTA 6 update: Will PC gamers face a longer wait than console players? Earnings by the big tech have further helped ease out the fears doing rounds about DeepSeek's new AI model leading towards a sharp decline in demand for Nvidia's chips, Barron's reported. Earlier this week, Google's parent company, Alphabet, announced its commitment to $75 billion worth of capital spending this year. Besides this, Nvidia even got a major shoutout from Amazon's Andy Jassy. On a call with analysts after the company's fourth-quarter earnings, Jassy stated that most AI computers have been "driven by Nvidia chips, and we obviously have a deep partnership with Nvidia and will for as long as we can see into the future". Amazon earlier informed that its capital expenditures this year are expected to be around $105 billion, majorly driven by its AI data center buildout. This will be a 25% jump from 2024, which itself witnessed a 57% high compared with the previous year. Also Read: Football Manager 2025 cancelled after multiple delays, developers now focused on FM26 In a research note, J.P. Morgan analyst Doug Anmuth stated that in light of DeepSeek, the Amazon CEO believes the "cost of inference will substantially come down over time." "However, similar to cloud, where Amazon Web Services cut prices 134 times between 2006-2023, Amazon believes lower inference costs will increase customers' total spending as customers infuse applications w/inference & GenAI," Anmuth added. 1. What is DeepSeek? DeepSeek is the name of a free AI-powered chatbot by the Chinese company of the same name. 2. Who are DeepSeek's competitors? Major competitors include OpenAI, Anthropic, and Cohere.

Morgan Stanley Thinks The Demand For NVIDIA's Hopper And Blackwell Chips Remains "Solid," With DeepSeek Creating "Some Challenges" On The Margins

This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy. As NVIDIA's quarterly earnings draw ever closer, Wall Street analysts are churning out their takes on the GPU manufacturer's prospects with growing regularity. After Citi recently appreciated NVIDIA's newfound attractive valuation post DeepSeek-induced swoon, today Morgan Stanley is out with its much more bullish take on NVIDIA's near-term stock price trajectory. As a refresher, China-based DeepSeek recently shocked the global tech sector with its breakthrough R1 model, which is able to more than compete with OpenAI's o1 model but with just around 1/50th of the typical costs associated with training a complex LLM. However, a new analysis has since then postulated that DeepSeek's CapEx might have been as high as $1.6 billion, entailing operating costs of as much as $944 million. Nonetheless, DeepSeek's R1 model has unleashed a renewed focus on efficiency to the possible detriment of NVIDIA. Coming back, Morgan Stanley continues to see NVIDIA's recent selloff as a "buying opportunity." Nonetheless, the Wall Street titan concedes that the DeepSeek phenomenon has increased "long-term uncertainties" for NVIDIA, and created "some challenges," albeit manageable ones. Morgan Stanley feels that the demand for Hopper and Blackwell chips remain "solid" in the near-term and that the overarching confidence in NVIDIA's growth story will return in the second half of 2025 with a renewed focus on AI inference and ASIC-related enthusiasm. Of course, the growing severity of US chip-based export curbs in relation to China is a key risk for NVIDIA. However, Morgan Stanley remains confident that the GPU manufacturer will be able to wade through these turbulent currents. Elsewhere, a lack of retrenchment among hyperscalers also supports the bullish view around NVIDIA. We noted recently that Microsoft, Google, Meta, and Tesla have continued to project elevated CapEx for 2025, despite the DeepSeek phenomenon. Meanwhile, as mentioned earlier, Citi now expects NVIDIA to report $38 billion in revenue for its January-ending quarter, and a whopping $42.5 billion for the April-ending one, bolstered by the Blackwell production ramp-up by mid-year. Interestingly, given the recent correction in NVIDIA shares, Citi has calculated that the stock now has a P/E ratio in the "mid-20s," around 25 percent below its ASIC peers! Finally, Citi expects NVIDIA's margins to bottom out in the April-ending quarter. Given the growing chip restrictions on China, Citi has slightly reduced its price target for the stock from $175 to $163 while maintaining an overall 'buy' rating.

Despite DeepSeek rout, BofA Securities maintains a Buy on Nvidia; here's why

BofA Securities analyst Vivek Arya maintained a bullish stance on Nvidia as he predicted sustained growth due to strong demand from major clients like Microsoft and Meta. He projected fourth-quarter revenue of $38.7 billion and adjusted EPS of $0.86.Despite Nvidia's stock dip after DeepSeek's latest development, BofA Securities analyst Vivek Arya has maintained a "Buy" rating on Nvidia with a price target of $190, as per a report. Arya's top pick is Nvidia, ahead of the upcoming fourth-quarter earnings call on February 26, reported Benzinga. He projected Nvidia's fourth-quarter revenue to reach $38.7 billion and adjusted EPS of $0.86. While he anticipated a modest earnings beat and expects sales guidance to align with previous forecasts, he also predicted a dip in gross margins for the first quarter. Arya claimed that Nvidia's transition to the Blackwell product, alongside restrictions in China, could impact short-term performance, as per Benzinga. According to Arya, this could be the low point for investor sentiment. Nvidia might use the earnings call to reassure investors of its Blackwell product execution and offer a confident outlook for fiscal 2026, with growth projections exceeding 60% for data centre sales, according to the analyst. Arya also mentioned Nvidia's upcoming GTC Conference on March 17, where the company is likely to spark excitement with its promising pipeline, including the GB300 and Rubin projects, as well as developments in physical AI and robotics. Arya remains bullish on Nvidia's long-term prospects, despite the noise from DeepSeek, reported Benzinga. He pointed to the strong demand from Nvidia's large customers, such as Microsoft and Meta. These companies have not changed their decision due to the rise of DeepSeek. According to the analyst, Nvidia's leadership in AI-driven computing infrastructure, particularly in training and inference, positions it well for sustained growth. He expects rising demand from the West (US cloud, enterprise, OpenAI Stargate, etc.) to offset China's headwinds for Nvidia, reported Benzinga. What does BofA Securities think about Nvidia's future? BofA Securities analyst Vivek Arya is still very bullish on Nvidia. Despite short-term challenges, he's confident that Nvidia will continue to dominate the AI space, especially with strong demand from big clients like Microsoft and Meta. He has maintained a "Buy" rating on the stock with a target price of $190. What makes Nvidia a leader in AI infrastructure? Nvidia remains a key player in AI infrastructure due to its dominance in AI training and inference. The company's ability to innovate with both hardware and software, alongside strong demand from major clients like Microsoft and Meta.

Prediction: Nvidia's DeepSeek AI Uncertainty Is a Buy Opportunity

Jose Najarro has positions in Nvidia and Palantir Technologies. The Motley Fool has positions in and recommends Nvidia and Palantir Technologies. The Motley Fool has a disclosure policy. Jose Najarro is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through their link they will earn some extra money that supports their channel. Their opinions remain their own and are unaffected by The Motley Fool.