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Nvidia (NASDAQ: NVDAIntel shares are up 154% this year, driven largely by insatiable demand for its graphics processing unit (GPU) chips amid the rise of artificial intelligence technology.
But Nvidia isn’t necessarily the only way to take advantage of the chip. It is this food frenzy that brings us to today’s question from SA Asks Investment: What is a good alternative stock for Nvidia?
We asked South African analysts Jonathan Weber, Michael Del Monte, Uttam Dee and Jerry Wang of JR Research for their picks.
Jonathan Weber: I think Taiwan Semiconductor Manufacturing Company (TSM) is a great alternative. It has a great market position, strong growth, and benefits from the momentum Nvidia has as it is the manufacturer of Nvidia. It is also much cheaper than Nvidia.
Michael Del Monte: You can play the trade in several ways. I prefer to go down one level to Oracle (ORCL), Dell (DELL), and Hewlett Packard Enterprise (HPE) as buyers of GPUs to build servers and, by extension, build AI factories. Premiums remain relatively low, which provides some upside potential from a valuation perspective.
Uttam Day: Advanced Micro Devices (AMD) is poised to enter two major markets where it sells: data center graphics processing units (GPUs) and personal computers. The company is expected to regain low single-digit market share in the data center segment, buoyed by an impressive product roadmap that is now moving to an annual launch cycle to match NVDA. The personal computer market is also expected to see marginal growth. With revenues forecast to grow in the 10% range and earnings forecast to outpace that, AMD could easily see double-digit growth in its stock.
Jerry Wang of JR Research: Nvidia is leveraging the AI data center infrastructure. It is the market leader by a wide margin. However, AMD’s AI business is expected to exceed $4 billion this year, up from almost nothing last year. I think AMD can be seen as an alternative to tap into the AI gold mine.