Nvidia vs. Intel: Which is the Better AI Stock?
The artificial intelligence (AI) market has been a driving force behind the significant rise in chip stocks. As demand for graphics processing units (GPUs) continues to grow alongside the AI market, established companies like Nvidia and Intel are well-positioned to benefit. But which of these tech giants is the better AI investment? Let’s delve into the details and find out.
Nvidia, with its years of dominance in GPUs, has emerged as one of the most established companies in AI. It currently holds an estimated market share of 80% to 95% in AI GPUs. This head start in the AI race has allowed Nvidia to supply its chips to the entire AI market, leading to impressive earnings and stock performance. In fact, Nvidia became the first chipmaker to achieve a market cap of $1 trillion.
The company’s meteoric rise is evident in its skyrocketing quarterly revenue, operating income, and free cash flow. With $17 billion in free cash flow, Nvidia has the financial resources to further expand in the AI sector and defend its dominance. On the other hand, Intel is at an earlier stage in its AI expansion, suggesting that it has more room to grow.
Intel, despite facing some recent challenges and weaker guidance, has made significant strides in the AI market. The company unveiled a range of AI chips, including the Gaudi3 GPU designed to rival Nvidia’s and AMD’s offerings. Intel also showcased new Core Ultra processors and Xeon server chips, both featuring neural processing units for efficient AI program execution.
Although Nvidia boasts a more established role in AI, Intel still has the potential to carve out a lucrative position in the industry. The AI market’s projected compound annual growth rate (CAGR) of 37% through 2030 indicates that there will be ample opportunities for both companies. The market is expected to surpass $1 trillion well before 2030, indicating the potential for significant revenue boosts for Intel.
From a valuation standpoint, Nvidia’s forward price-to-earnings (P/E) ratio is about 50, while Intel’s is 32, indicating that Nvidia is the more expensive stock. However, Nvidia’s growth potential and financially healthy business make it an attractive investment. In the next two fiscal years, Nvidia’s earnings per share could reach $24, while Intel’s may reach nearly $3. Factoring in the respective forward P/E ratios, Nvidia’s stock could rise by 93% by fiscal 2026, while Intel’s may increase by 116%.
Considering these projections, Intel appears to be the better AI stock based on value and potential growth. However, Nvidia offers a more established position in AI and a more robust business. Investors who are willing to pay Nvidia’s premium price tag may find it to be the more reliable choice.
In conclusion, both Nvidia and Intel have their strengths and opportunities in the AI market. Nvidia’s established dominance and financial health make it a strong contender, while Intel’s potential for growth and recent advancements in AI chips position it well for success. Ultimately, investors should carefully consider their investment goals and risk tolerance when deciding which company to invest in for AI-related gains.
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– The Motley Fool: https://www.fool.com/investing/2024/01/29/better-ai-stock-nvidia-vs-intel.aspx]
