The first half of 2024 saw significant surges in the stock prices of semiconductor companies Nvidia and Arm. Nvidia's shares soared by 150%, while Arm's shares increased by 122% [98d106c9]. However, concerns are now being raised about the potential for a crash in Nvidia's stock in the second half of the year [63ef9507] [284494e8].
Nvidia is a market leader in data center GPUs and AI chips, and it has also expanded into CPUs, networking equipment, and software. The company has experienced significant growth in market cap and popularity due to its AI-focused graphics processing units (GPUs) [63ef9507] [284494e8]. Nvidia's H100 GPUs have become the go-to chip for businesses running generative AI solutions and training large language models [63ef9507].
While Nvidia has enjoyed pricing power and held onto its innovative advantages, concerns have been raised about the company's valuation. Nvidia's trailing-12-month price-to-sales (P/S) ratio is in rarified territory, suggesting that the stock may be overvalued [63ef9507].
Analysts on Wall Street have assigned a median price target of $128 per share for Nvidia, implying a 3% upside. However, the potential for a crash in the stock in the second half of 2024 has led to increased uncertainty [98d106c9] [63ef9507] [284494e8].
The recent gains in the growth-focused AI sector can be attributed to Nvidia's artificial intelligence technology. AI systems have the ability to learn over time without human intervention, making them more proficient at tasks and potentially learning new skill sets [284494e8]. The article suggests that history may offer a clue about Nvidia's future performance, citing previous instances where the stock experienced significant declines after periods of rapid growth [284494e8]. However, the author also acknowledges that predicting the future performance of a stock is challenging and that investors should consider multiple factors before making investment decisions [284494e8] [63ef9507].
It is important to note that the author of the article, Sean Williams, does not have any positions in Nvidia [63ef9507].
Nvidia has outperformed AMD in the past five years, with a gain of over 3,000% compared to AMD's 433%. Both companies benefit from the demand for GPUs in AI infrastructure. Nvidia's data center segment generated $22.6 billion in Q1 2025, a 427% YoY increase, while AMD's data center segment saw an 80% YoY increase to $2.3 billion. Nvidia has a dominant position in the AI chip space with nearly 10 times the revenue of AMD's data center segment. However, AMD is making inroads and has had serious inquiries about building an AI cluster with over 1 million GPUs. Nvidia's revenue is heavily reliant on its GPU products and data center segment, accounting for 87% of total revenue, while AMD's data center segment only accounts for 43% of its revenue. Both stocks have similar forward P/E valuations. Nvidia has a strong moat with its CUDA platform, while AMD is rapidly pushing innovation with next-generation architecture GPU platforms. The author prefers Nvidia as a long-term investment due to its moat in the AI chip space, but also sees potential in AMD ahead of a gaming console refresh cycle [1cdfbf4a].
Increased interest in AI has spotlighted tech stocks that could enjoy major gains. AMD's stock has soared 150% since the start of 2023, driven by excitement over AI. However, mediocre quarterly results and a soaring share price have tanked the value of AMD's stock. Intel and Alphabet are two companies that stand out as bargains compared to AMD. Intel has increased its market share in CPUs for three consecutive quarters and is refocusing its business model around AI. Alphabet has the lowest P/E ratio among these companies and has significant potential in AI. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is also a member of The Motley Fool's board of directors [da88ee25].
Chip stocks have soared since last year alongside a boom in artificial intelligence (AI). As a leader in the industry, AMD stock has risen 28% since last June, outperforming the S&P 500's increase of 24% in the same period. But while AMD stock's growth has benefited current investors, it has also raised the price of entry for new ones. Intel and Amazon are better value AI stocks than AMD based on price-to-sales (P/S) and forward price-to-earnings ratios. Intel is preparing to invest $100 billion in building chip manufacturing plants throughout the U.S., while Amazon's cloud platform, Amazon Web Services (AWS), has a leading 31% market share in cloud computing. Both companies offer promising growth opportunities in AI.