The ChatGPT sensation in 2023 reversed the 2022 tech bubble burst for Nvidia (NASDAQ: NVDA), struggling with huge declines in the PC and gaming markets. Nvidia stock surged almost 500% since January 2023, making new milestones of US$400 and US$800, way above its 2021 crypto peak of around US$330. If you missed Nvidia’s stock price rally, you could still make up for it by buying Advanced Micro Devices (NASDAQ: AMD) stock.
AMD stock has surged 182% since January 2023 and is yet to realize the sales growth from its artificial intelligence (AI) portfolio.
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Nvidia and AMD in the AI race
After PC, server, and mobile computing, we are entering the next age of AI and accelerated computing. AI computing processes large amounts of data in real time and develops inferences from it to deliver actionable insights. This level of computing needs specialized chips and supporting software that can handle such large amounts of computing load.
Nvidia’s graphics processing units (GPUs) remain unbeatable in AI, gaming, and edge computing. However, AMD has also been developing a complete end-to-end AI infrastructure, comprising AI chips for clouds, data centres, servers, PCs, and embedded devices.
AMD has a full suite of competitive central processing units (CPUs) used for general-purpose computing, GPUs for accelerated computing, and data processing units (DPUs) for moving data around the data centre. Like Nvidia, AMD’s data centre segment’s revenue has surpassed the revenue of the PC and gaming segments, marking the age of AI.
However, AMD has not yet realized the sales from the AI boom. AMD’s data centre revenue surged 7% to US$6.5 billion in full-year 2023, while Nvidia’s data centre revenue surged 409% to US$18.4 billion in just the fourth quarter of 2023. AMD may not realize the same growth as Nvidia, but it is chasing the same AI boom as Nvidia.
Why am I bullish on AMD and Nvidia?
Some analysts expect Nvidia’s stock price to see some correction as the AI GPU shortage eases. AMD could also see some correction. But these are the stocks to buy and hold for the long term, irrespective of the market. Here’s why.
A PC, mobile phone, car, or software can face disruption from technological advancements. Mobile phones replaced PCs in many areas, like accessing the internet. But a chip is the starting point of any technological innovation. They are here to stay and facilitate disruptive technological advancements through more powerful and efficient chips. Semiconductors are the most complex pieces of technology, and mastering them takes decades of research. There are very few chip companies that can make advanced chips.
Nvidia and AMD are the only two that offer high-performance discrete GPUs. AMD and Intel are the only two companies with high-performance PC and server CPUs. This intellectual property (IP) advantage puts AMD and Nvidia at the sweet spot for long-term growth.
Best chip stocks to buy and hold
In this digital age, work is ongoing on several technology forms like AI, robotics, drones, autonomous cars, satellites, and space research. All of it needs high-performance computing of AMD and Nvidia chips. AMD is set to ride the AI wave. It is developing the networking capabilities to facilitate the AI ecosystem.
Nvidia already rode the gaming and crypto wave and is now riding the AI wave. It also has a competitive advantage in the future technologies of autonomous cars and AI at the edge. In the next 10 years, US$880 might look cheap for one stock of Nvidia. Similarly, US$200 might look like a bargain for a stock of AMD 10 years from now.
