Investors have been snapping up Nvidia (NVDA 0.76%) shares rapidly over the past few years, contributing to the company’s remarkable gain of over 2,000% since 2020, as a leading player in the artificial intelligence (AI) market.
Nvidia, recognized as the top seller of AI chips, boasts a strong history of earnings advancement. With the booming AI sector and Nvidia’s commitment to ongoing innovation, its revenue is expected to grow significantly in the upcoming years.
Investors who decide to purchase and hold Nvidia stock may find themselves benefiting in the long term, especially as the stock currently represents a solid entry point. Following a recent decline, it is trading near its lowest level in about a year relative to future earnings forecasts.
However, Nvidia is not the only tech firm with promising prospects; other companies that haven’t surged as much could also see significant gains. Notably, Amazon (AMZN -0.26%) and its competitor in AI chips, Advanced Micro Devices (AMD 0.93%), might be worth considering more closely. Should investors overlook Nvidia in favor of these two tech stocks? Let’s explore.
The Case for Amazon
Amazon generates billions of dollars each year from its thriving e-commerce and cloud computing divisions. The company has been leveraging AI to enhance operational efficiency in e-commerce and provide valuable tools to customers and sellers alike, resulting in cost reductions and improved retention of shoppers and sellers.
In the cloud sector, Amazon Web Services (AWS) has translated AI investments into significant revenue, noting an annual revenue run rate of $115 billion attributed to diverse AI products and services. Given that AWS is Amazon’s primary profit engine, this growth holds particular significance.
The Case for AMD
While AMD is a competitor in the AI chip market, Nvidia maintains a dominant 80% market share. However, AMD doesn’t necessarily need to outpace Nvidia to succeed; it offers an alternative to pricier Nvidia chips, driving notable growth for the company. Last year, AMD’s data center revenue jumped 94% to over $12 billion, while total revenue increased 14% to more than $25 billion.
Despite being smaller than Nvidia’s $130 billion revenue, AMD’s solid growth and profitability—showing a 49% gross margin last year—indicate strong potential moving forward. The company claims to be “investing aggressively in AI,” hinting at forthcoming growth opportunities as the AI market is predicted to experience explosive expansion this decade.
Are These Stocks a Better Choice than Nvidia Right Now?
Since Nvidia is presently trading at attractive levels and continues to lead in the AI sector, it’s not advisable to disregard this market leader entirely. Additionally, concerns about overall declines in technology stocks shouldn’t overshadow these companies’ long-term growth potential.
That said, AMD is currently the most affordable option and could be on the brink of significant growth, while Amazon offers investors robust diversification through its involvement in both e-commerce and cloud markets. Therefore, while Nvidia shouldn’t be dismissed, considering investments in Amazon and AMD at today’s favorable prices could also be beneficial.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, and Nvidia. The Motley Fool has a disclosure policy.
