The chip market exploded last year as the boom in artificial intelligence (AI) soared demand for more powerful hardware. The growing interest in AI services has increased the need for graphics processing units (GPUs), the chips needed to train and run AI models.
As a result, companies at the forefront of this technology: Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ: AMD), have enjoyed stock price increases of 222% and 84%, respectively, since April last year. These companies have exciting long-term prospects in the AI ​​space due to the success of their chip businesses and could benefit from market tailwinds for years.
The AI ​​market reached nearly $200 billion last year and is expected to grow at a compound annual growth rate of 37% through 2030. On this trajectory, the sector is expected to reach nearly $2 trillion by the end of the decade.
So despite this year's meteoric rise, Nvidia and AMD stock still have a lot to offer new investors in the long run. Let's take a closer look at these chipmakers and decide whether Nvidia or AMD is the better AI stock in April.
Nvidia
It's been hard to avoid Nvidia coverage over the past year, as the company has become a symbol of the AI ​​boom. In 2023, the company cornered his AI chip market, achieving an estimated 90% market share in GPUs and seeing revenue soar.
The company's revenue for the fourth quarter of 2024 (ending January) increased 265% year-on-year to $22 billion. Operating income increased 983% to nearly $14 billion. This impressive growth is primarily due to a 409% increase in data center revenue, reflecting the surge driven by AI.
The company's free cash flow increased 430% last year to more than $27 billion, showing it has the capital to continue investing in AI and maintaining its market dominance.
As a major chipmaker, Nvidia has a strong position. In addition to AI hardware, the company's chips are used in a wide range of applications including cloud platforms, video game consoles, laptops, custom-built PCs, and more.
Therefore, the company is one of the best choices for investing in technology, especially for companies looking to profit from the future of AI.
Advanced Micro Devices
AMD was slightly behind the AI ​​party, but Nvidia outperformed it in the market. However, AMD has invested heavily in the industry and has some lucrative partnerships that could grow significantly in the coming years.
Last December, AMD announced the MI300X GPU for AI. This chip is designed to compete directly with Nvidia and has already led to some of the most prominent players in the technology industry. microsoft and meta platformsign on as a client.
AMD is diversifying by moving into AI-equipped personal computers (PCs). According to research firm IDC, PC shipments are expected to increase significantly this year, with AI integration serving as a key catalyst. Additionally, a report from Canalys predicts that 60% of all PCs shipped in 2027 will be AI-enabled.
AMD's earnings don't yet reflect its heavy investment in AI, but the company's recent quarterly reports suggest it's moving in the right direction. Revenue for the fourth quarter of 2023 rose 10% year over year to $6 billion, beating analysts' expectations by about $60 million. The company's AI-focused data center division posted 38% revenue growth.
Which is a better AI stock: Nvidia or AMD?
Nvidia and AMD are poised to benefit from AI growth for decades. Both stocks are likely to strengthen your portfolio over the long term. However, earnings per share (EPS) estimates indicate that AMD may have more room to operate over the next two years.
These graphs show that NVIDIA's EPS could reach $36 by fiscal year 2026, while AMD's EPS could reach just over $7. On the surface, Nvidia appears to be the clear winner. However, if you multiply those numbers by the expected price-to-earnings ratios for both companies (35 for Nvidia and 47 for AMD), you get a stock price of $1,260 for Nvidia and $329 for AMD.
Using these recent stock prices, Nvidia's stock price is expected to rise 44% and AMD's stock price to rise 93% over the next two fiscal years. This significant difference highlights the fact that AMD is in the early stages of its AI efforts and may have more room for growth in the short term. As a result, AMD is currently a much stronger buy than her Nvidia.
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Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool's board of directors. Dani Cook has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: His long January 2026 $395 call on Microsoft and his short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
The first edition of Improving AI Stocks: Nvidia vs. AMD was published by The Motley Fool.