Should You Forget Nvidia and Buy This Artificial Intelligence (AI) Stock Instead?

Core Viewpoint - Nvidia has seen significant growth due to increased investment in AI chips, but concerns about its high valuation and potential risks from China are causing investors to reconsider its stock value [1]. Group 1: Nvidia's Performance and Challenges - Nvidia's revenue and share price surged in 2023, with trailing-12-month revenue reaching $113 billion, making it challenging to maintain high growth rates [3]. - Analysts project a 52% revenue growth for Nvidia in calendar 2025, which is about half the growth rate of the previous year, with supply chain constraints posing a risk to meeting these estimates [4]. - Demand for Nvidia's H200 is strong, but the company relies on data center operators to continue increasing their spending, raising questions about the sustainability of this trend [5]. Group 2: Competitive Landscape and Risks - China's DeepSeek claims its AI model can compete with leading American models at a fraction of the cost, potentially prompting big tech companies to reduce spending on AI infrastructure, which could negatively impact Nvidia [6]. - The data center market has experienced growth cycles that have previously hurt Nvidia, and there is a risk of over-investment leading to excess capacity and a downturn in spending [7]. - Nvidia's stock is considered expensive with a forward P/E ratio of 42, and the company must navigate several risks to justify this valuation [8]. Group 3: AMD as a Competitive Alternative - AMD has shown substantial stock growth, returning nearly 5,000% over the last decade, and is currently trading at a lower P/E ratio than Nvidia while offering similar growth potential [9]. - AMD's revenue from data center GPUs is expected to be only 20% of its total revenue this year, providing a better risk-to-reward ratio compared to Nvidia [9]. - AMD's focus on designing GPUs for AI inferencing may give it an edge, with its MI325X chip reportedly delivering up to 20% higher performance for AI inference than Nvidia's H200 [10][11]. Group 4: Future Outlook - AMD is positioned for significant growth in data center GPUs, trading at 24 times this year's earnings estimate, which is nearly half of Nvidia's valuation, while analysts expect AMD's earnings to grow over 44% annually [12]. - If data center investment in AI hardware continues, AMD could outperform Nvidia, and its lower P/E multiple may cushion the impact of any slowdown in GPU spending [13].