AI Chip Battle: Nvidia’s Rapid Rise vs Intel’s Turnaround Potential
Semiconductor stocks have seen impressive gains in 2023, despite a slowdown in chip demand in the smartphone, PC, and data center markets. The adoption of artificial intelligence (AI) applications has fueled the growth of the semiconductor industry, particularly in the AI chip market. As a result, companies like Nvidia and Intel have become highly sought after by investors.
Nvidia, the frontrunner in the AI chip market, is expected to experience significant gains due to the soaring demand for AI chips. The company’s fiscal 2024 second-quarter results are projected to show a 64% year-over-year increase in revenue to $11 billion. Nvidia’s graphics cards have become essential for training large language AI models and deploying generative AI applications. With an estimated market share of at least 90%, Nvidia is well-positioned to dominate the AI chip market.
Analysts predict that Nvidia’s revenue driven by AI could reach a staggering $300 billion by 2027, with a market share of 75% in AI chips. This implies a tenfold jump from the estimated $25 billion to $30 billion in AI revenue for 2023. With such promising numbers, Nvidia is poised to maintain its momentum and achieve substantial revenue growth in fiscal 2024 and beyond.
While Intel has faced challenges in the PC market, the company has made strides towards a turnaround. Although its second-quarter revenue declined 15% year over year, Intel’s PC business showed signs of improvement, and the rate of decline slowed down notably. Intel’s AI chips have seen healthy demand, and the company has built a $1 billion revenue pipeline in this niche. With a dominant share of the server processor market, Intel is well-positioned to capitalize on the growing AI chip opportunity.
According to Intel, the market for server processors, graphics cards, FPGAs, and ASICs for data centers and AI servers is projected to be worth $110 billion in 2027, compared to $40 billion in 2022. As Intel commands over 82% of the server processor market, it stands to benefit significantly from the growing demand for AI chips.
While Nvidia’s stock valuation is higher due to its impressive growth, Intel offers a potentially attractive option for investors seeking to benefit from the AI boom at a lower price. Intel’s price-to-sales ratio is significantly lower than Nvidia’s, making it a potentially appealing choice for those with a lower risk appetite.
In summary, both Nvidia and Intel are well-positioned to capitalize on the booming AI chip market. Nvidia’s rapid rise and dominance in the AI chip market make it an enticing investment, but its high valuation may deter some investors. In contrast, Intel’s potential for a turnaround and its strong presence in the server processor market present an opportunity for those seeking undervalued stocks. Ultimately, investors should carefully analyze their risk appetite and consider both companies’ prospects before making a decision.
