Nvidia’s stock has been on the rise due to the growth in demand for artificial intelligence (AI) chips, but the stock is already overvalued. The Motley Fool suggests that there are better AI stocks to invest in, two of which are Amazon and Advanced Micro Devices (AMD).
Amazon‘s cloud business, Amazon Web Services (AWS), is expected to see better growth due to the increasing demand for AI services. As the market leader in cloud services, Amazon is well-positioned to deliver high returns to shareholders from the growing demand for AI cloud services. Furthermore, AWS makes up 17% of Amazon‘s total revenue but generates almost all of Amazon‘s operating profit, making it a crucial driver for the company. Recently, AWS introduced new tools that make it easier to create applications using generative AI.
Meanwhile, AMD, a company that has trailed Nvidia in market share in the GPU market, is likely to see growth in AI. AMD has built an extensive portfolio of chips over the last decade to cater to the AI opportunity. AMD now offers data processing units and adaptive system-on-chip following its acquisition of Xilinx, which extends the company’s addressable market to AI applications at the edge. AMD has also launched new products created to serve the growing demand for AI technology in the retail space.
One of the most significant differences between Nvidia, Amazon, and AMD is their valuations. Analysts note that Nvidia stocks are overvalued, with a price-to-sales ratio (P/S) of 37. Meanwhile, Amazon has a decade-low P/S valuation of 2.5, and AMD stocks trade at a P/S ratio of 8.6.
In conclusion, investors looking for AI companies to invest in should consider Amazon and AMD instead of Nvidia. These two companies offer better value and have the potential to outperform the market over the next several years.
