Much of the current discussion around artificial intelligence (AI) revolves around “Seven greats“Stocks. Over the past 18 months, big tech companies have made a series of headline-grabbing billion-dollar investments in artificial intelligence initiatives.
Among the leaders in the Seven Wonders are Nvidia And Amazon (Nasdaq: AMZN). While Nvidia seems to have a strong pulse on all aspects of the AI field, I wouldn't overstate the company's dominance.
Let's dive into what's driving Nvidia's growth right now, and explore how Amazon could outperform the company in the long term.
NVIDIA is the leader in artificial intelligence, but…
Nvidia designs advanced semiconductor chips called graphics processing units (GPUs). GPUs have all kinds of applications from training large language models, machine learning, autonomous driving, and more.
Aside from the technology sector, Generative AI has use cases in healthcare as well. Nvidia's GPUs are used by leading pharmaceutical companies such as Novo Nordisk – Ozempic and Wegovy maker.
Unsurprisingly, Nvidia's prolific reach has helped the company amass a staggering 80% share of the AI chip market.
While it may seem as if Nvidia's lead is insurmountable, keep in mind that the AI revolution is still in its early stages. Although Amazon may be looking back, I would argue that the company is on pace and preparing for a marathon-style race.
…Some at big tech companies are making moves of their own
The AI startup scene is quite crowded. One of the most prominent players is a machine learning company called Hugging Face, a proud unicorn Sales forceAmazon, Google, Nvidia, Intel Corporation, Advanced micro devices, QualcommAnd IBM As investors.
Did you notice anything from that investor syndicate? Many of them are either chip companies or cloud computing specialists.
It's fitting that Amazon is both. In addition to Amazon Web Services (AWS), Amazon is developing a set of training and inference chips. These chips, named Trainium and Inferentia, are unlocking new sources of growth for AWS as cloud computing becomes more competitive than ever.
Furthermore, Hugging Face recently announced its partnership with AWS to deploy workloads on the latest version of Inferentia. I see this as a huge win for Amazon, and ultimately a stepping stone for the company to move away from reliance on Nvidia products in the long term.
Another way Amazon is starting to build some momentum is with its $4 billion investment in another AI startup, Anthropic. Like Hugging Face, Anthropic trains its generative AI models on Amazon's Trainium and Inferentia chips, and also uses AWS as its primary cloud provider.
If that's not enough to paint Amazon as a serious competitor in the world of artificial intelligence, consider the company's planned $11 billion investment to build data centers. While Nvidia also competes in the data center space, companies like Amazon and inspiration They have their own plans.
Is now a good time to invest in Amazon stock?
Right now, Amazon stock is trading for roughly $179 per share. This is very close to the company's all-time high of $189.
With that in mind, you might think Amazon stock is expensive. However, the chart below indicates something different.
Over the past 12 months, Amazon's stock price has risen nearly 50%. By contrast, the company's trailing 12-month earnings per share (EPS) rose 181%.
Because the company's earnings growth is accelerating faster than the stock price, Amazon is effectively doubling its price-to-earnings (P/E). He refuses Year after year. This means that even though the stock price has reached all-time highs, Amazon is technically cheaper today than it was last year.
I think Amazon is underrated when it comes to AI. The company is investing heavily and is already starting to ignite some new momentum. Over time, I suspect the moves the company is making today will pay off in a big way and provide Amazon with a layer of flexibility to compete.
To me, Amazon stock is very cheap and represents a compelling long-term opportunity in the AI space. While Nvidia will likely remain the AI nascent in the near term, I think Amazon is making some smart chess moves that will ultimately put it in a position of superiority in the long term.
Should you invest $1,000 in Amazon now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adam Spatacco He has positions at Amazon, Novo Nordisk, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Nvidia, Oracle, Qualcomm, and Salesforce. The Motley Fool recommends Intel, International Business Machines, and Novo Nordisk and recommends the following options: long January 2025 $45 calls on Intel and short May 2024 $47 calls on Intel. The Motley Fool has Disclosure policy.
Did Amazon just say “Checkmate” to Nvidia? Originally published by The Motley Fool