Artificial intelligence (AI) stocks have been a hot topic in the market in 2023. Two chipmakers, Nvidia (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD), have seen significant jumps in their shares due to the booming demand for AI chips. With predictions of a substantial rise in the AI chip market, investors are eager to determine which stock – Nvidia or AMD – is the better investment for the AI boom in 2024.
Nvidia’s AI Dominance Fueling Rapid Growth
Nvidia’s projected revenue for fiscal 2024 is set to exceed $59 billion, more than double its previous fiscal year revenue of $27 billion. This exponential growth is attributed to Nvidia’s leadership in the AI chip market, expected to reach a market share of 85%. Analysts predict the company’s AI chip sales could generate $65 billion in revenue in fiscal 2025. Nvidia’s aggressive strategies, including expanding supply and introducing new powerful chips, have solidified its position in the AI chip market and anticipated growth in AI-related niches, such as AI personal computers (PCs).
Nvidia’s estimated 54% revenue increase for the new fiscal year, reaching $91 billion, reflects its strong performance. The company’s forward price-to-sales ratio and estimated market cap of nearly $2.1 trillion indicate a sustained surge in AI-driven growth. This remarkable growth and potential market dominance position Nvidia as a strong contender in the AI chip market.
AMD’s Progress Towards AI Market
Contrasting Nvidia’s expected massive AI revenue, AMD forecasts AI-related revenue of $2 billion in 2024. While Nvidia’s early entry into the AI chip market secured its pricing power, AMD is striving to make headway in this lucrative market. The introduction of AMD’s MI300X AI accelerator, outperforming Nvidia’s flagship H100 data center GPU, shows potential for AMD in the AI chip market.
AMD’s claim of its AI accelerators being faster and capable of training larger AI models than Nvidia’s GPUs presents an optimistic outlook. Additionally, its partnerships with server OEMs and cloud service providers, coupled with advanced chip packaging capacity from manufacturers like Taiwan Semiconductor Manufacturing Company, indicate potential growth opportunities for AMD in the AI chip market. Although AMD anticipates significant AI revenue growth from $400 million last year, it still has ground to cover in catching up with Nvidia’s market position.
The Verdict
The contrasting revenue growth expectations between Nvidia and AMD underscore their performance differences. While Nvidia anticipates 50%-plus revenue growth in fiscal 2025, AMD expects a slower 17% growth in 2024. AMD’s relatively lower price-to-sales ratio reflects its slower growth trajectory compared to Nvidia. Nvidia’s dominant position in the AI chip market and projected substantial revenue increase make it a more compelling investment option compared to AMD for the AI boom in 2024.