AI isn’t just another tech trend, it’s rewriting the rules of the digital world. From e-commerce to data centers, from search engines to digital ads, and down to the semiconductor chips that power it all, AI is flipping the script on how businesses operate and compete.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
For investors, that seismic shift spells opportunity. As AI companies push into new markets and expand their customer reach, stock pickers are looking at a gold rush in the making.
The scale of that opportunity becomes clearer when you look at the chip market that underpins AI. SNS Insider estimates it was worth $61.45 billion in 2023, but by 2032 it’s projected to soar to $621.15 billion. That’s a compound annual growth rate north of 29%.
The big question now is which chip stocks offer the best way to ride this wave. One top investor, known by the pseudonym Value Portfolio, has weighed in with a deep dive on two AI chip makers – Nvidia (NASDAQ:NVDA) and Intel (NASDAQ:INTC). You might be surprised at which one the investor picked as the superior stock to buy. Let’s take a closer look.
Nvidia
A clear winner has emerged in the lucrative race for AI data center supremacy, and it is not even close. At this point, even casual observers are well-aware that Nvidia has powered ahead of all other would-be competitors, and now controls some 90% of the market.
Not surprisingly, Nvidia’s share price has surged accordingly, gaining over 1,000% since ChatGPT hit the market in late 2022. Along the way, it has reached a $4 trillion market cap and become the most valuable publicly traded company in the world.
Despite its mammoth size, Nvidia just continues to deliver astonishing revenue growth that consistently outpaces market expectations. In its most recent fiscal Q2 earnings, released late last month, the company surpassed its own guidance and analyst projections to reach $46.74 billion in sales – up 56% year-over-year – along with a gross margin north of 75%.
As the AI revolution transitions into the Agentic phase, demand for compute power is slated to increase by multitudes of 100- or even 1,000-times prior generations. This suggests that the appetite for NVDA’s technologically advanced GPUs will only grow more intense in the years ahead, as industry and government continue to shell out billions of dollars to build out data centers around the world.
But not everyone is singing Nvidia’s praises. Value Portfolio, who’s ranked among the top 3% of stock pros on TipRanks, urges investors to proceed with caution.
“Nvidia has a lofty valuation that requires substantial growth in cash flow, which we don’t see it as likely to achieve,” states the investor.
While acknowledging its incredible track record, Value Portfolio spots a number of worrisome signs on the horizon. These include an exceptionally high degree of customer concentration, with over 50% of Nvidia’s revenues coming from three sources (which the investor guesses are Amazon, Microsoft, and Meta). Value Portfolio throws cold water on the idea that these megafirms will continue shelling out massive amounts of capital indefinitely, especially with Nvidia’s margins in the 70% range. Not only might these hyperscalers run low on available capital, but they are also looking for alternatives.
Meanwhile, the investor points out that Nvidia’s revenues are slowing, while margins are beginning to contract.
“We expect this to happen more and more making it increasingly difficult for the company to outperform the market,” adds Value Portfolio, rating NVDA shares a Strong Sell. (To watch The Value Portfolio’s track record, click here)
Needless to say, Wall Street has a very different take than Value Portfolio. With 35 Buys, 3 Holds, and a solitary Sell, NVDA cruises to a Strong Buy consensus rating. Its 12-month average price target of $211.14 implies a 23% upside potential from current levels. (See NVDA stock forecast)
Intel
If every reaction has an equal and opposite reaction, one could argue Intel has been one of the victims of Nvidia’s incredible successes.
The Silicon Valley pioneer has thus far missed out on the major gains of the AI story, and INTC’s share price has lost roughly half of its value while Nvidia took off into the stratosphere over the past few years. By now, Intel’s missed opportunity to acquire a stake in OpenAI almost a decade ago has become a cautionary tale of legendary proportions, and the once proud company has been burning through money, notching a $19 billion net loss in 2024.
Recognizing the need for drastic change, Intel’s board turned to a new leader earlier this year, appointing Lip-Bu Tan as CEO to right the floundering ship. Tan arrived with energy and determination, quickly launching a shake-up that included revamping corporate culture, trimming headcount, and refocusing the company on its engineering core. Perhaps most importantly, he put AI at the center of Intel’s long-term vision, while acknowledging that a successful transition will take time.
That time horizon, however, doesn’t deter everyone. Value Portfolio argues that it’s not too late to climb aboard “the Intel boat,” and is encouraged by recent events, including Softbank’s $2 billion investment, the U.S. government’s ownership stake, and the strong revenue numbers in the company’s Q2 earnings report.
“These developments suggest renewed confidence in Intel’s turnaround and strategic direction,” the 5-star investor opined.
Value Portfolio further stresses that Intel’s biggest opportunity relies on its ability to pursue cutting edge silicon, and further notes that the U.S. government could play a meaningful role in offsetting some of the costs involved and funneling – or even forcing – potential customers towards Intel.
The latter point could be especially key, points out Value Portfolio, as Tan has acknowledged that Intel will not accelerate its 14A node unless it attracts major customers. Hopeful that the company will experience success with both its 18A and 14A nodes, the investor is rating INTC shares a Buy.
Wall Street, however, is more cautious. With 26 Hold ratings far outweighing 1 Buy and 3 Sells, INTC stock carries a consensus Hold (i.e., Neutral) rating. Meanwhile, the 12-month average price target of $22.17 implies ~10% downside. (See INTC stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.