Buy this wonderful artificial intelligence (AI) stock instead.

By | December 22, 2023

celebrating success in the stock market

The excitement about artificial intelligence (AI) has produced many millionaires this year, as chip stocks want Nvidia (NASDAQ: NVDA) have skyrocketed 230% since January 1. The company has benefited significantly from increased demand for graphics processing units (GPUs), which are crucial for training AI models.

Nvidia’s business has exploded this year. However, it’s worth looking at companies that are at a slightly earlier stage in their AI journey, as they could have more headroom in the coming years.

Intel (NASDAQ: INTC) is an exciting option, with years of experience in the chip market. The company also plans to launch a new AI GPU in 2024.

So forget Nvidia. This is why Intel is a great AI stock to buy instead.

Intel is taking steps to challenge Nvidia’s dominance in 2024

It hasn’t been easy being an investor in Intel in recent years. The company was responsible for more than 80% of the central processing unit (CPU) market for at least a decade and was the leading chip supplier for Apple‘s MacBook range for years. However, Intel’s dominance made the company complacent, making it vulnerable to more innovative competitors.

As a result, Advanced micro devices began gradually eating away at Intel’s CPU market share in 2017, with Intel’s share now down to 69%. Then in 2020, Apple cut ties with Intel in favor of much more powerful internal hardware. Intel shares subsequently fell 4% over the past three years. Meanwhile, annual turnover fell by 19%, while operating profit fell by 90%.

However, the fall from grace has seemingly lit a new fire under Intel. According to Mercury Research, Intel regained 3% of its CPU market share from AMD from Q2 2022 to Q2 2023.

Additionally, Intel has focused its efforts on the $137 billion AI market, with plans to challenge Nvidia’s dominance by 2024. The industry is expected to grow at a compound annual growth rate of 37% through 2030, which would increase it by more than $1 trillion. before the end of the decade.

As a result, forecasts show that even if Intel cannot dethrone Nvidia, there will be plenty of opportunities for Intel to capture market share and significantly benefit from the development of the industry.

Earlier this month, Intel unveiled Gaudi3, a generative AI chip intended to compete directly with Nvidia’s H100. The GPU will ship in 2024 alongside Core Ultra and Xeon chips that contain neural processing units, allowing them to run AI programs faster.

Shares of Intel are up more than 70% in 2023, driven almost entirely by its AI prospects. While that’s nowhere near Nvidia’s share growth over the period, it could mean Intel has more to offer new investors in the coming years.

By far more growth potential than Nvidia

INTC EPS estimates for the next two fiscal yearsINTC EPS estimates for the next two fiscal years

INTC EPS estimates for the next two fiscal years

The charts show that Intel’s earnings could reach nearly $3 per share over the next two fiscal years, while Nvidia’s is expected to reach $24 per share. That’s why Nvidia might seem like a good idea at first glance. However, if we multiply these figures by the companies’ forward price-to-earnings ratios, the stock price comes to $130 for Intel and $939 for Nvidia.

Looking at their current positions, the numbers predict Intel’s shares will rise 184% and Nvidia’s 95% over the next two fiscal years. While both are seeing impressive growth, Intel is expected to post much bigger gains.

The numbers are consistent with Nvidia’s meteoric rise this year compared to Intel’s more gradual expansion. Intel is just getting started with AI and could have a lucrative 2024. So if you’re looking for an AI stock to add before the new year, Intel is a screaming buy over Nvidia right now.

Should You Invest $1,000 in Intel Right Now?

Before you buy shares in Intel, consider this:

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Dani Cook has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Advanced Micro Devices, Apple, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2023 calls $57.50 on Intel, long January 2025 calls $45 on Intel, and short February 2024 calls $47 on Intel. The Motley Fool has a disclosure policy.

Forget Nvidia: Buy These Beautiful Artificial Intelligence (AI) Stocks Instead was originally published by The Motley Fool

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