Plenty of tech companies are all-in on artificial intelligence, but perhaps two of the most prominent players in AI’s growth are semiconductor companies that have been at the forefront of AI processing for years.
Nvidia (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD) both have a unique role to play as AI infrastructure spending increases. But which is the better artificial intelligence stock? Let’s take a closer look.
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If you’re already interested in AI stocks, then you’ve surely come across Nvidia. The company is the clear leader in the AI semiconductor market, with an estimated 70% to 95% of AI data centers using its GPUs.
That dominance will be very difficult for Nvidia’s competitors to overcome. The company has such a significant head start in the AI hardware race and continues to roll out new processes that its customers clamor for (the new H200 chip being one of them) that it’s no wonder Nvidia’s share price has spiked 379% over the past three years.
But it’s not just that Nvidia’s lead in AI semiconductors is well established; the company is also experiencing massive financial benefits from its lead. In its second quarter (which ended July 28) financial results, Nvidia’s total revenue jumped 122% from the year-ago quarter to $30 billion, and non-GAAP (adjusted) earnings per share of $0.68 rose 152%.
While Nvidia’s shares are unlikely to see the same gains they’ve made over the past few years, I think they still have more room to run because tech companies are making massive investments in AI infrastructure. Goldman Sachs estimates AI data center spending will total $1 trillion over the next few years. As that spending ramps up, Nvidia’s lead in the AI processor space is sure to benefit.
AMD has a similar opportunity as Nvidia and is another top graphics processor company that’s taking advantage of AI’s growth.
In the company’s third quarter (ended Sept. 28), AMD reported revenue of $6.8 billion, up 18% from the year-ago quarter, and diluted generally accepted accounting principles (GAAP) earnings per share of $0.47, an impressive 161% year-over-year increase.
One of the most notable areas of growth for AMD is in the company’s data center segment, which includes GPU sales of its AI processors. The company’s data center revenue spiked 122% in the third quarter to $3.5 billion. Like Nvidia, AMD is benefiting from large tech companies investing tons of money into building AI data centers, which will likely bring years of infrastructure spending.
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