Over the last few years, investors have been snapping up Nvidia (NASDAQ: NVDA) shares rapidly, contributing to the company’s remarkable increase of over 2,000% since 2020.
There are numerous indicators that this leading AI firm has further growth potential. As the top seller of AI chips globally, Nvidia boasts a strong track record of earnings expansion. The overall growth in the AI sector, combined with Nvidia’s commitment to innovation, is likely to enhance its revenue in the coming years.
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For investors willing to buy and hold Nvidia stock, now may be an ideal time for long-term gains, especially as the stock is currently at a strong entry point after a recent decline, trading close to its lowest valuation in about a year concerning future earnings estimates.
Importantly, Nvidia is not the sole tech firm with a bright future. Other companies such as e-commerce and cloud leader Amazon (NASDAQ: AMZN) and Nvidia’s competitor in the AI chip space, Advanced Micro Devices (NASDAQ: AMD), might also be worth considering. Should investors shift their focus from Nvidia to these two tech stocks instead? Let’s explore this further.
The Case for Amazon
Amazon has established a massive revenue stream through its flourishing e-commerce and cloud computing segments, effectively leveraging AI to enhance efficiency in both areas. The integration of AI solutions has streamlined operations and provided significant benefits to both customers and sellers on its platform, fostering return business.
In the cloud services sector, Amazon Web Services (AWS) has quickly turned its AI investments into substantial revenue, reporting an annual revenue run rate of $115 billion attributed to diverse AI products and services. This growth is crucial since AWS is Amazon’s primary profit source, with net sales last year increasing by 11% to over $638 billion and operating income rising nearly 90% to $68 billion.
The Case for AMD
While AMD trails Nvidia, which dominates with an 80% market share in AI chips, it doesn’t require surpassing Nvidia to thrive in the AI landscape. AMD manufactures CPUs and GPUs, presenting a more affordable alternative to Nvidia’s pricier offerings, which has led to significant revenue growth.
Last year, AMD’s data center revenue climbed 94% to over $12 billion, with total revenue reaching more than $25 billion, which, although lower than Nvidia’s $130 billion, demonstrates strong profitability with a gross margin of 49%. The company’s continued investment in AI signals potential for future growth, especially with analysts expecting the overall AI market to expand substantially over the next decade.
Evaluating Investment Options
While Nvidia is currently trading at appealing values and remains a standout in the AI sector, it would be wise for investors to also consider AMD and Amazon. AMD presents the most economical option at the moment, while Amazon provides a valuable diversified investment across e-commerce and cloud domains. Although not overlooking Nvidia, investors might find attractive opportunities in both Amazon and AMD at present market prices.
