These companies' stocks offer more value than Nvidia and have greater potential in AI.
The artificial intelligence (AI) market captivated Wall Street in 2023, with excitement about the generative technology fueling a 50% market push. Nasdaq-100 Trends in the technology sector over the past 12 months.
It's been over a year since OpenAI launched ChatGPT (the typical beginning of the AI boom), and the industry shows no signs of slowing down. In fact, the AI market is projected to expand at a compound annual growth rate of 37% through 2030, and spending should reach nearly $2 trillion, according to data from Grand View Research.
chip manufacturer Nvidia (NVDA 1.27%) The company's graphics processing units (GPUs) have become a go-to for developers around the world and are gaining a lot of attention in the AI space. The company's stock price has risen 220% since May last year, making it the third-highest market capitalization in the world ( microsoft and apple).
However, investing in companies in the early stages of their AI ventures can be worthwhile as they can potentially yield greater returns in the coming years. So forget about Nvidia and consider buying these two artificial intelligence stocks instead.
1. Advanced microdevices
Advanced Micro Devices' (AMD -0.31%) The stock has risen 72% in the last year, benefiting from Nvidia's success in AI and the growth in empathy associated with the company's growing position in the market.
Although the two companies are constantly compared, AMD and Nvidia are at very different stages of development. This difference is most notable in AMD's market cap of $250 billion, while Nvidia's market cap is $2.3 trillion. Still, AMD holds his second-largest market share in GPUs, suggesting it has great potential in AI.
On the other hand, a lower market value could mean more room for growth over the next decade.
AMD announced its first quarter financial results for 2024 on April 30th. Revenue increased 2% year over year and exceeded analysts' expectations by $20 million. Earnings per share were $0.62, compared to expectations of $0.61. The chipmaker exceeded market expectations. But it wasn't enough to lure investors back, and the company's stock has fallen 3% since the report was released.
However, AMD stock remains an attractive investment in AI. In the first quarter of 2024, the company's AI-focused data center division reported an 80% year-over-year revenue increase due to increased sales of MI300X AI GPUs.
CEO Lisa Su revealed that the company has sold more than $1 billion in chips since the launch of the MI300X GPU, with customers such as Microsoft. meta platformand oracle.
Data by YCharts
Additionally, this chart shows that AMD's stock may be a better bargain than Nvidia's, as it has a much lower price-to-sales (P/S) ratio. This is a useful valuation metric that divides a company's market capitalization by its revenue over the past 12 months. In this case, AMD's lower P/S indicates that its stock is a much better value than Nvidia.
In addition to exciting prospects in AI, AMD has no hesitation at the moment.
2. Alphabet
share in alphabet (GOOG -0.75%) (Google -0.77%) The company has soared 7% since announcing its 2024 Q1 results on April 25th. The company rallied investors by beating expectations on a number of fronts, proving that its heavy investment in AI is starting to pay off.
Chipmakers like Nvidia and AMD are developing the hardware that enables AI, so it's an attractive way to invest in AI. But it's also worth investing in companies that develop software that enables billions of users to integrate AI into their daily lives and workflows. And Alphabet is an exciting option.
The company's revenue for the first quarter of 2024 rose 15% year over year, beating Wall Street expectations by nearly $2 billion. AI appears to be boosting multiple areas of Alphabet's business. The company is using his AI to improve its advertising business with AI-powered advertising, and the Google Services division has recorded a 14% year-over-year revenue increase.
But Alphabet's most lucrative foray into AI appears to be Google Cloud, the company's cloud computing platform. The division reported a 28% year-over-year increase in sales and a 371% increase in operating income to $900 million.
Thanks to services like YouTube, Android, and many platforms under Google, Alphabet has a huge user base. As a result, the company has great potential in AI with a wide range of applications for generative technology. Alphabet will benefit from AI tailwinds for years to come.
Data by YCharts
Like AMD, Alphabet stock is significantly better valued than Nvidia stock. The company's P/S multiple is 80% lower than Nvidia's, indicating that the company's stock offers significantly better value.
Alphabet's strong operations and $69 billion in free cash flow suggest significant potential for AI with the brand and financial strength to thrive in the market over the long term.
Alphabet executive Suzanne Frye is a member of The Motley Fool's board of directors. 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, Alphabet, Apple, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
