Nvidia's AI Dominance: Stock Performance and Future Prospects

Better Artificial Intelligence Stock: Nvidia vs. Intel | The Motley Fool

These companies have invested billions in AI and could be attractive buys after a sell-off. Tech stocks have taken a deep dive, with the Nasdaq-100 Technology Sector down 10% in just five days. Fears of a recession triggered a major sell-off, with seven of the most valuable tech companies losing a combined $1 trillion in market value on Aug. 5. As a result, now is an excellent time to bulk up your portfolio with companies active in lucrative fields like artificial intelligence (AI). Despite the market downturn, AI remains a sector with massive growth potential. Data from Grand View Research shows the market hit $197 billion last year. Yet, that figure is expected to reach nearly $2 trillion by the end of the decade, expanding at a compound annual rate of 37%. In terms of the companies powering much of the industry, it's hard to go wrong with chip stocks. Nvidia (NVDA -0.21%) and Intel (INTC -3.81%) are compelling options, especially after a sell-off. Nvidia designs the chips used by the majority of AI developers. Intel is building the world's largest AI chip plant in Ohio as it seeks to retake a position as a top manufacturer. So, let's take a deep dive into these chipmakers' businesses and determine whether Nvidia or Intel is the better AI stock to invest in. Nvidia's stock has dipped 10% since July 30 as Wall Street has cooled on tech stocks. However, past trends suggest the company won't be down for long, and it could be worth buying the dip. The company's stock plunged 50% amid an economic downturn in 2022, fueled by significant spikes in inflation and reduced spending across multiple markets. Yet, macroeconomic improvements and a boom in AI have seen the share price skyrocket 586% since then, alongside soaring earnings. Nvidia's revenue, operating income, and free cash flow have hit new heights over the last year, making the recent sell-off look like an overreaction. The current economy is night-and-day different from what it was in 2022, or even 2008, for that matter. Many tech companies are growing and have posted multiple quarters of encouraging results. Meanwhile, Nvidia is at the top of its AI game, responsible for 80% of the AI graphics processing units (GPUs). The company got a head start in the industry over rivals like AMD and Intel, which allowed it to expand its brand power. Millions of developers have grown so accustomed to Nvidia's CUDA development software accompanying its AI GPUs that many are hesitant to switch to a rival product. As a result, the company has retained its AI dominance even while its competitors have debuted similar offerings at lower prices. With solid earnings and significant market share, Nvidia is an attractive investment after a sell-off. Intel's stock price has plummeted 34% in the last five days, its worst drop in decades. Declines were spurred by economic fears and exaggerated by poor quarterly results. The company posted its second-quarter earnings on Aug. 1. Revenue fell 1% year over year, missing forecasts by $150 million. Meanwhile, earnings per share of $0.02 fell short of expectations by $0.08. Poor earnings reflect Intel's hefty investment in restructuring, shifting to a foundry model, and placing a larger emphasis on AI. The company is focusing on the big picture and long-term rewards, suggesting investors should do the same. Since last year, Intel has made some major changes, unveiling multiple new AI-enabled chips and beginning construction on the first of at least four chip factories in the U.S. Neither of these ventures come cheap, as reflected in its second-quarter losses. However, they could pay off over the next five to ten years. CEO Pat Gelsinger said in a recent earnings call that increased production on its AI-capable Core Ultra PC chips contributed to poor earnings. But he added that "the AI PC will grow from less than 10% of the market today to greater than 50% in 2026," suggesting it is likely to make up for those losses. The company is taking a similar approach to manufacturing. Intel has invested billions into opening chip fabs throughout the U.S. as it seeks to become the country's leading AI chip manufacturer. It'll take time, but it could be worth buying the stock cheaply now to hold over the long term. Nvidia and Intel are at vastly different stages of their AI journeys, with one dominating the industry and the other yet to see a return on its investments. Considering their valuations, neither is a huge bargain. But Nvidia's stock is a better value, with a lower price-to-earnings (P/E) ratio. Meanwhile, its P/E is close to its 10-year average for the metric, while Intel's is far higher than its average. Intel could be a smart long-term play, but its dismal earnings and a high valuation make Nvidia a more attractive buy right now. Nvidia has an established position in AI and consistent earnings, making it too good to pass up.

Is the Stock Market Sell-Off a Reason to Buy Nvidia Stock? | The Motley Fool

Investors waiting for a pullback in Nvidia (NVDA -0.21%) stock may believe the opportunity has arrived. The stock has pulled back since peaking at just above $140 per share in June. Investors should also remember it has lost more than half of its value twice since 2018. However, the artificial intelligence (AI) stock is up nearly 2,400% over the last five years. Indeed, Nvidia has earned much of this growth thanks to its leadership in the AI chip space. But amid a sell-off in tech stocks, should investors start buying now or hold out for a lower stock price? Nvidia began as a gaming company and is involved in fields such as automotive and professional visualization. More recently, the stock has shot into the stratosphere thanks to its work in becoming the dominant company in the AI chip space. Although Advanced Micro Devices, Qualcomm, and others have offered competing products, Nvidia is the technical leader, dominating at least 80% of the market. Also, the $30,000 or more price tag for its AI chips is far above what its peers can command in this market. Still, as mentioned, the stock sold off in recent weeks. Besides a general sell-off in the tech sector, the Department of Justice has hit Nvidia with multiple investigations regarding its dominance in the AI chip sector, according to The Information. The same publication also reported that design flaws will delay the launch of its next-generation Blackwell AI chip. This may have a broader impact across the tech market as cloud providers such as Amazon, Alphabet, and Microsoft may count on this technology to deliver some of their productivity gains to investors. Admittedly, its financials may experience little direct impact. The AI chip market is expected to grow at a 38% compound annual growth rate through 2032, and Nvidia and its peers have struggled to keep up with demand. In the first quarter of fiscal 2025, Nvidia's revenue grew 262% to $26 billion. Also, while we will not know how it performs in fiscal Q2 until its August 28 earnings release, it expects $28 billion in quarterly revenue at the midpoint, which would amount to 107% yearly growth. Nvidia's problem is that its stock is arguably still priced for perfection, and the lawsuits and developmental delays indicate it falls short of that standard. Given its rapid growth, the price-to-earnings (P/E) ratio of 59 may seem justified. However, other valuation metrics point to an expensive stock. Its 31 price-to-sales (P/S) ratio exceeds AMD's sales multiple of just over 9. Also, its 50 price-to-book value ratio is far above AMD's book value multiple of 4. Although Nvidia's technical lead calls for a premium, such levels seem excessive, considering Nvidia's challenges. When it comes to buying Nvidia, the answer may be both to buy now and hold out for a lower price. Here's why. Due to Nvidia's dominance in the AI chip market, revenue and profits will likely continue to rise rapidly, even with the delayed launch of the Blackwell chips. Thus, it will probably remain a long-term winner at just about any price. Still, investors should employ dollar-cost average (DCA) investing instead of purchasing all at once. Considering Nvidia's recent challenges and elevated multiples, the chances of a further near-term pullback are high. Also, as mentioned, Nvidia stock has lost more than 50% of its value twice since 2018. Hence, investors cannot rule out such a decline from happening again. DCA investing can serve as a compromise between owning Nvidia stock without denying oneself an opportunity to buy at a lower price.

Should You Buy Nvidia Stock Before August 28? Here's What the Evidence Suggests. | The Motley Fool

The AI chipmaker is scheduled to report results later this month. Can the stock continue its relentless climb? The adoption of artificial intelligence (AI) is ongoing, but some investors fear the trend is getting a little long in the tooth. Fears about the economy and weakness in AI stocks helped push the Nasdaq Composite into correction territory earlier this month, and with valuations stretched, some believe there could be further declines ahead. Nvidia (NVDA -0.21%) has become the poster child for the generative AI trend. When the company reports its results later this month, it's not hyperbole to suggest that Wall Street will be sitting on the edge of its seat, hoping to gain insight into the state of AI adoption. Nvidia's sales have skyrocketed since the start of 2023, driving the stock up 619% (as of this writing), though it's currently more than 22% off its high. With so much riding on Nvidia's quarterly results, investors are wondering whether the recent stock price decline represents a buying opportunity ahead of the company's highly anticipated financial report. Let's review the available evidence. The biggest driver for Nvidia over the past 18 months has been the rapid adoption of generative AI by cloud infrastructure providers best positioned to monetize AI. Nvidia's graphics processing units (GPUs) are the gold standard for these applications. As a result, cloud infrastructure providers, including Amazon Web Services, Microsoft Azure, and Alphabet's Google Cloud, have been upgrading their data centers to provide the computational horsepower needed to run AI. Even Meta Platforms has jumped on the bandwagon, creating one of the leading large language models (LLMs) so it can profit from AI. Demand for Nvidia's AI-centric processors remains robust among the cloud leaders, and each has highlighted plans for higher capex spending to support their AI aspirations. This bodes well for Nvidia in the current quarter. There's further evidence that suggests Nvidia's results will be robust. Advanced Micro Devices (AMD -1.50%), otherwise known as AMD, is one of Nvidia's biggest rivals in the GPU space. The company reported its second-quarter results late last month, and the strength of its AI-related sales caught many market watchers off guard. While revenue grew 9% year over year and beat expectations, its data center sales surged to a record $2.58 billion, up 115%, driven higher by soaring demand for AI. Arm Holdings (ARM -1.21%) creates the CPU cores found in many of Nvidia's AI processors, and its results were similarly upbeat. For its fiscal 2025 first quarter (ended June 30), Arm reported its fourth consecutive quarter of record results. The company generated record revenue of $939 million, up 39% year over year, the result of record license revenue driven by "the proliferation of AI." Super Micro Computer (SMCI -0.23%) supplies server and storage solutions featuring next-generation AI processors from Nvidia and others. For the company's fiscal 2024 fourth quarter (ended June 30), revenue of $5.3 billion grew 143% year over year and 38% quarter over quarter. Despite its parabolic growth rate, management noted Supermicro continued to be hamstrung by short-term "supply chain bottlenecks." The thread that runs through these AI players is that demand remained strong in the most recent quarter, driven by the secular tailwind of AI. This suggests Nvidia's sales should be similarly robust. There are other reasons to believe Nvidia stock could have additional upside from here. Research by analysts at Bank of America shows that in the 12 months following a stock-split announcement, stock-split stocks gained 25%, on average, compared to just 12% for the S&P 500. Since Nvidia announced its stock split on May 22, the stock has actually fallen 19% (as of this writing), as fears regarding the state of the economy overshadowed the tailwinds of AI. If history is any indicator, Nvidia still has plenty of double-digit upside potential ahead. For investors looking to make a fast buck, Nvidia is likely not the stock for you. As the recent stock chart shows, Nvidia has been -- and will continue to be -- a volatile stock. While investors who bought last year are likely sitting on triple-digit gains, those who bought last month could be down more than 22%. This helps to illustrate a timeless investing truth: It's best to buy shares in the best companies you can find and hold them for three to five years, as you're less likely to suffer the impact of short-term volatility. For those wondering whether Nvidia stock will go up or down after its upcoming financial report, your guess is as good as mine. I sent my crystal ball to the shop years ago, but it still hasn't come back. Furthermore, anyone who professes to know what will happen in the days or weeks that follow is being less than truthful. If I were to hazard a guess -- and that's all it would be -- I suspect Nvidia will report another quarter of record sales. Analysts' consensus estimates are calling for revenue of $28.52 billion, slightly ahead of Nvidia's guidance of $28 billion. However, much of how the stock price reacts in the wake of the report will depend on the company's profitability and Nvidia's forward-looking guidance. It's important to take a step back and look at the big picture. Nvidia's GPUs are the gold standard for AI processing, and while there's always the threat of competition, no heir apparent has emerged. Most experts believe it's still early innings for generative AI as adoption continues to ramp up. Even the most conservative estimates suggest that generative AI will be a trillion-dollar market, with some forecasts multitudes higher. Nvidia stock trades at a premium of 38 times earnings (as of this writing), but the company's triple-digit growth, industry-leading position, and long track record show that it's worth every penny. My advice to you is this: If you believe -- like I do -- that AI has a long way to go and Nvidia will maintain its dominance in the market, then buy Nvidia stock and hold on for dear life.

Where Will Nvidia Stock Be in 1 Year? | The Motley Fool

It's too early in the AI boom to say Nvidia's run is over. Here's what investors should consider. The artificial intelligence (AI) boom is well underway, and there may be no company that's benefited from it more than Nvidia (NVDA -0.21%). For years, the company's semiconductors have been a top choice among leading tech companies for AI processing, and now, it's paying off for Nvidia's stock. The company's share price has more than doubled over the past year, causing many investors to wonder: Where does Nvidia go from here? Here are a few thoughts on the company's leading AI position and what it could mean over the next year. To understand where Nvidia might be a year from now, you need to know where it is right now -- sitting at the top of the AI hill. Nvidia holds an estimated 70% to 95% of the AI chip market and is continually innovating to hold onto its lead. The company recently released its H200 AI processor, the follow-up to its ultra-popular H100. CEO Jensen Huang says that demand is already outstripping supply. How does this AI dominance translate into a real benefit for Nvidia? The company's data center revenue -- which includes its AI chip sales -- soared 427% from the year-ago quarter in Q1 (which ended April 28), reaching $22.6 billion. What about Nvidia's competition? It does have some worthy rivals. Advanced Micro Devices is its main competitor and shouldn't be ignored. But even the scale of AMD's AI growth is minuscule, compared to Nvidia. AMD's second-quarter (ending June 29) data center sales rose 115% to just $2.8 billion. While impressive, it's just a fraction of Nvidia's data center revenue and far below its sales growth. Some of the world's largest tech companies made headlines recently when they reported quarterly results. Investors were interested in their revenue and earnings, but their billions of dollars in AI spending garnered lots of attention. Here's how two tech CEOs recently defended the considerable spending spree: According to Goldman Sachs, other tech companies are spending massive amounts of money to compete in AI, as well, and all of their collective spending will total $1 trillion over the next few years. There's no guarantee that Nvidia will benefit from these investments or that companies will continue to invest as heavily as they have over the past year. But tech companies are currently embattled in an AI land grab. Nvidia's AI chips are the best, and spending is on the rise. That puts the company in a great position over the next year. Let me state the obvious first: Nvidia is expensive. The company's shares have a price-to-earnings ratio (P/E) of 40.9. That's not cheap by any measure, but it's less expensive than its shares were this time last year when it had a P/E ratio of about 63. A recent pullback in the stock market -- thanks to a handful of factors, including concerns about U.S. job growth -- has pushed Nvidia's share price down about 20% over the past month. This recent dip could be an opening for investors who are bullish on AI. Nvidia's shares won't see the massive gains they've experienced over the past year. However, considering its leading AI position, along with the fact that large tech companies are ramping up AI infrastructure spending, Nvidia has the potential to outpace the market over the next year or more.

Nvidia Is Dominating the Artificial Intelligence Chip Market, but Apple Has Been Securing Supply From Another Tech Giant | The Motley Fool

Should Nvidia investors be worried about a growing number of competitors in the chip market? Nvidia (NVDA -0.21%) has been a scorching-hot buy over the past couple of years, largely due to the key role it plays in artificial intelligence (AI). The company's AI chips are crucial for companies that are developing AI models. And Nvidia has a commanding 80% market share when it comes to AI chips. That's part of the reason why investors have remained bullish on the stock -- it's arguably the best-positioned stock to benefit from growing demand for AI. But given how lucrative the opportunities are in AI, it's only a matter of time before more competitors emerge and fight for market share. Apple (AAPL 1.37%) has recently turned to one of those unexpected competitors to source chips for its new AI-powered iPhones. One of the companies that has been developing its own chips is Alphabet (GOOG 0.95%) (GOOGL 1.01%). And Apple has been training its new AI system, called "Apple Intelligence," using Alphabet's custom chips, according to a research paper. The company used two versions of Google's tensor processing unit to develop its AI models, which gives iPhone users access to generative AI features, including advanced writing tools, the ability to generate images, and a Siri assistant with "all-new superpowers." Alphabet is a potentially strong competitor for Nvidia to worry about. The company has plenty of resources to work with. Last year, Alphabet generated more than $69 billion in free cash flow. It has been investing in its AI chatbot Gemini, and AI chips could provide it with yet another growth opportunity to pile money into. The courts recently found that the company's search engine, Google, has an illegal monopoly. And depending on what the consequences of that finding are, Alphabet may soon see a huge incentive to find a new growth opportunity to pursue, as the ruling may have a detrimental effect on a key part of its business. Beyond Alphabet, however, there are other competitors for Nvidia to worry about. Meta Platforms has been working on an AI chip of its own, as has Amazon. And investors also shouldn't forget about AMD, which is a more traditional rival for Nvidia. Although it has been late to the game, AMD has made it clear that AI is a big priority for the business, and it could also take away some sizable market share from Nvidia in the future. Nvidia has generated incredible gains due to its dominance in the AI chip space. And it is working on innovating and coming out with more advanced chips to ensure it remains on top. But maintaining such a large market share can be incredibly difficult, especially with so many big tech companies out there with deep pockets to contend with. They aren't simply going to ignore such a massive opportunity in AI chips. The company's revenue has taken off over the past year, with Nvidia's growth rate in recent quarters being well in excess of 200%. Those kinds of numbers, while extremely impressive, are also extremely difficult to maintain. At some point, Nvidia's growth rate will start to come down, especially if more competition emerges in the field. And its high-priced chips may also need to come down in price if that's the case, which may lead to both a slowing growth rate and smaller profit margins than the 50%-plus margins it has been averaging of late. Nvidia's stock has been giving back some gains in recent weeks, but it's still a top company to invest in if you want exposure to the red-hot AI market. While other companies may try to take market share from Nvidia, that doesn't mean that they will be able to do so overnight. Nvidia is still in an excellent position to continue growing, but I would expect its growth rate and margins to come down a bit in future quarters, especially as companies potentially reduce AI spending due to a possible economic slowdown. Nvidia's stock may struggle in the near term, but as long you're willing to hang on for the long term, it can still make for a good buy. Still, you should brace for some challenges ahead.

Forget Nvidia: Buy This Magnificent Artificial Intelligence (AI) Stock Instead | The Motley Fool

Investors may want to consider the company that's actually manufacturing most of the underlying tech. There's no denying Nvidia has been the centerpiece of the artificial intelligence (AI) revolution thus far. Its technology is used in the vast majority of the world's AI platforms simply because it offers the most computing power. And Nvidia shares have performed accordingly since the movement got going in earnest early last year. As is the case with any other industry, however, time is driving changes on the AI front. Nvidia is no longer the market's top opportunity. This title is shifting toward Taiwan Semiconductor Manufacturing Company (TSM 1.56%), which is arguably better positioned to capitalize on the next chapter of AI's growth story. Nvidia isn't doomed. But it would be naïve to not recognize that most of AI's easy money has already been made. Competition is heating up. Intel and Advanced Micro Devices are stepping up their games. Price wars are underway. There's an often overlooked but important detail about the AI hardware business you must understand, however. That is, chipmakers like the aforementioned Nvidia and AMD usually don't manufacture their own chips. They typically outsource such work to third-party "contract" manufacturers that are capable of fabricating this silicon to its designers' specifications. Taiwan Semiconductor is one of these contract manufacturers. Indeed, it's the biggest name in the business. It's estimated to manufacture on the order of two-thirds of the world's semiconductors and associated circuitry, and an even greater share when just looking at the planet's high-performance chip market. This might help drive the point home: Advanced Micro Devices as well as Nvidia are both confirmed customers of Taiwan Semiconductor. Intel continues to invest in the construction of its own foundries, although it's forged a developmental partnership with Taiwan Semiconductor to do so. Connect the dots. Taiwan Semiconductor may actually be the technological heart and soul of the global AI revolution. And it's not limited to data centers. As time marches on, AI computing work is making its way toward end users, and end users' mobile phones in particular. Apple's newest processor -- the A17 found in the iPhone 15 Pro and Pro Max -- is capable of handling generative AI tasks on the device itself rather than in the cloud, where most generative AI work is presently done. It's not just Apple wading into on-device artificial intelligence waters, either. Qualcomm's newest high-performance Snapdragon 8 (Gen 3) mobile processors can handle the same kind of load on mobile devices. Apple as well as Qualcomm both also utilize Taiwan Semiconductor's chip-manufacturing services. Taiwan Semiconductor Manufacturing doesn't make every chip used by the aforementioned outfits, for the record, nor does it manufacture every AI chip the world's currently using or will use in the future. It's likely losing market share as other players ramp up their capacity to crank this silicon out, in fact. Intel in particular is showing the potential to become a serious competitor to Taiwan Semiconductor. There's still more upside here than not, however, despite the prospect of shrinking market share. Market research outfit Skyquest suggests the artificial intelligence hardware market is set to grow at an annualized pace of 15.5% through 2031, while the mobile AI market is likely to grow at a compound yearly rate of nearly 27% for the same time frame. In this vein, the analyst community believes Taiwan Semiconductor's top line is set to nearly double between last year and 2026, as the AI chipmaking industry gels. So why is this stock down more than 20% just since its July peak (with many other artificial intelligence names down similarly)? That's got more to do with the market environment than anything else. Investors finally began realizing last month that a few too many stocks had reached too-frothy valuations. The disappointing jobs report for July released on Friday of last week didn't help either, leading the crowd to presume lingering economic weakness is on the horizon. And maybe it is. Don't lose perspective, though. Even in a tough economic environment most chip brands are still going to need new silicon. And most of them are still in no position to make much (if any) of it themselves. They'll still need Taiwan Semiconductor to make it for them. Indeed, economic weakness might even stifle capital expenditures on new foundries, making a proven, cost-effective foundry like Taiwan Semiconductor Manufacturing all the more important to the AI business's biggest players.