Forget Nvidia: 2 Artificial Intelligence (AI) Stocks to Buy Now
What specific factors contributed to Nvidia's stock soaring more than 200% over the last year?
Nvidia's stock soared more than 200% over the last year due to several factors:
- The company's strategic shift to focus on the data center market, where its graphics processing units (GPUs) are used for AI and accelerated computing applications12. Nvidia controls roughly 90% of this market.
- The rise of advanced processors in data centers has been a significant driver of Nvidia's growth. Its compute and networking segment accounted for the majority of its revenue for the first time in the company's 2023 fiscal year1.
- Nvidia's H100 graphics processing unit (GPU) was the hottest piece of AI hardware last year, driving the company's data center revenue to $47.5 billion during its fiscal 2024 year.
- The AI boom has significantly benefited Nvidia, as its GPUs are the foundational hardware underpinning the AI revolution. The company's most advanced processors are used by both small AI start-ups and the world's largest tech giants.
These factors have contributed to Nvidia's incredible stock performance, making it the best-performing "Magnificent Seven" stock over the last year and pushing its market cap to roughly $1.96 trillion.
What strategic changes is Intel implementing as part of its transition to a foundry model?
Intel is implementing several strategic changes as part of its transition to a foundry model. These changes include:
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Restructuring its business: Intel is restructuring its entire business around manufacturing to regain its position as the world's leading chipmaker. This involves building at least four factories across the U.S. and benefiting from President Biden's CHIPS Act, an initiative created to expand the U.S.'s manufacturing capabilities.
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Transitioning to a foundry model: Intel announced last year that it would transition to a foundry model in an effort to regain its position as the world's leading chipmaker. This move is aimed at making Intel the U.S.' primary manufacturer as chip demand grows.
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Focusing on AI: Intel has been in steep competition with Nvidia and Advanced Micro Devices in AI. Each has AI accelerators on the market and is striving to attract new clients. Intel's foundry model could set it apart from its rivals, as it is focused on building everybody's chips, including AI chips.
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Building partnerships: Intel's CEO, Pat Gelsinger, has said that the company wants to build everybody's chips, including AI chips, leveraging the U.S. factories. This suggests that Intel is looking to build partnerships with other companies in the AI space.
Overall, Intel's transition to a foundry model is aimed at regaining its position as the world's leading chipmaker and becoming the U.S.' primary manufacturer as chip demand grows. The company is also focused on building partnerships and expanding its offerings in the AI space.
How does Nvidia's forward price-to-earnings (P/E) and price-to-sales ratios compare to those of Intel and Microsoft?
Nvidia's forward price-to-earnings (P/E) ratio is higher than those of Intel and Microsoft. As of May 24, 2024, Nvidia's forward P/E ratio was 42.89. In comparison, Intel and Microsoft had lower forward P/E ratios, making their stocks relatively less expensive when considering future earnings projections. Additionally, the price-to-sales ratios also show that Nvidia's stock offers less value than Intel and Microsoft, suggesting that the latter two companies could provide better value for investors looking to capitalize on the growing AI market.