Nvidia has been the poster child for the rise of artificial intelligence (AI) , with its stock surging more than 180% this year, lifting its valuation to nearly $3.4 trillion. The company’s revenue is on track to double this fiscal year , driven by surging demand for its GPUs, which have become the de facto chips for AI applications.
In contrast, Intel stock had a rough year, still down 50% year-to-date and its market cap down to just $100 billion. Its revenue is expected to contract this year , but there’s a twist to the story: this might be the right time to reconsider AI leadership. Why? We’ll also look at the case of a cryptocurrency movement that rises 300% in a month: XRP is just starting to heat up.
Markets are often short-sighted and tend to extrapolate short-term trends into the long term. In the case of Nvidia , investors believe that demand for AI accelerators will hold up and that its margins and growth rates will remain strong . On the other hand, Intel ’s market share losses in the CPU space and struggles in its foundry business have made investors pessimistic about its future . However, almost everything in life is cyclical and this couldn’t be more true in the semiconductor market. Reducing positions in Nvidia and considering Intel stock could be a smart play right now. Let’s see why.
Nvidia’s AI boom could be ahead of schedule
Companies have poured immense resources into building AI models over the past two years. Now, training these massive models is a one-time affair that requires considerable computing power, and Nvidia has been the biggest beneficiary of this, as its GPUs are considered the fastest and most efficient for these tasks.
This is evident in Nvidia’s recent revenue growth. Sales are on track to expand from just $27 billion in fiscal 2023 to nearly $130 billion in fiscal 2025. However, the AI landscape could be changing. As models grow in terms of various parameters, performance gains are expected to be smaller.
Furthermore, the availability of high-quality data to train models could become a bottleneck. With much of the Internet’s quality data already processed by large language models, there could be a shift from large-scale, general-purpose AI models to smaller, specialized models, reducing demand for Nvidia’s powerful GPUs. The explosive demand that the company has experienced in recent years may have been brought forward, and future growth is likely to slow .
Now, demand for AI-related chips could shift from the training phase to the inference phase, which is when trained models generate outputs. Inference is less compute-intensive, which could open the door to alternative AI processors. It’s true that Nvidia will likely remain the leader in the inference space (it claims that inference accounts for about 40% of demand for its data center chips), but there’s an opportunity for rivals like AMD and even Intel to gain some market share.
During the initial wave of generative AI, enterprises and big tech companies rushed to invest in GPUs due to the “fear of being left behind,” with little concern for the costs and returns on their investments. This led to an increase in Nvidia’s pricing power, with net margins exceeding 50% in recent quarters.
However, companies and their investors will eventually seek returns, which could lead them to be more cautious about AI costs in the future, likely weighing on margins. And in addition to rivals like AMD and Intel, Nvidia’s biggest customers, including Google and Amazon , are stepping up efforts to develop their own AI chips. On Tuesday, Amazon announced plans to build an AI ultracluster — essentially a giant AI supercomputer that will be built using its proprietary Trainium chips . This could pose a risk to the generative AI industry leader’s business.
Intel’s foundry business is poised for a recovery
While the AI boom was the focus for Nvidia, the pessimism around Intel revolved around its foundry business. This business reported significant losses (operating loss of $7 billion in 2023) and faced a technological disadvantage against sector leader TSMC . However, the division is poised for a potential recovery with its new 18A process node. This technology, which includes RibbonFET transistors and PowerVia for power delivery at the rear, promises significant improvements in terms of performance and efficiency.
Intel has already secured contracts with major players like Amazon , Microsoft , and the U.S. Department of Defense for custom chip designs using the 18A process. The company has reached some key technical milestones with this process and expects third-party customers to bring their first 18A designs to production in 2025. If the semiconductor manufacturer successfully executes this transition, it could change the narrative about its foundry business. Take a look at why 2025 could be the year of Intel’s comeback, with a detailed analysis on how Intel stock could be re-priced higher.
Moreover, with Donald Trump possibly returning to the White House in 2025, Intel’s extensive U.S. manufacturing footprint is likely to become a much more valuable asset. Trump’s focus on boosting domestic manufacturing and reducing reliance on foreign supply chains could translate into favorable policies for the company. Potential tariffs on chips made abroad or incentives for domestic production could give it a competitive advantage, especially in its foundry division. Additionally, Intel’s status as the only U.S. semiconductor company that designs and manufactures cutting-edge chips positions it well to win more federal contracts.
Intel could offer better risk-adjusted performance
Intel stock is trading at a reasonable valuation of just 23 times projected 2025 earnings. In fact, the 2025 earnings estimate is depressed compared to historical levels, at around $1 per share due to the current headwinds. To put that into perspective, this company reported earnings close to $2 per share in 2022 and over $5 per share in 2021 and 2020.
This means that if Intel sees its earnings recover towards historic levels in the coming years, the stock could follow a similar path. The company is expected to return to revenue growth in 2024, with consensus estimates pointing to a 6% increase in revenue , and there are several tailwinds in both its chip and foundry businesses. Its CPU lineup, moving forward with Lunar Lake and Arrow Lake chips , positions it well for a recovery in the PC and server markets, and it could also see incremental growth in the AI processor space with its Gaudi 2 and Gaudi 3 accelerators.
On the other hand, Nvidia is trading at a lofty valuation of 48 times projected earnings for fiscal 2025. While it has seen impressive growth recently, it remains to be seen whether the good times will continue. And, at the current valuation, we see little room for error. The risks we pointed out could put Nvidia’s future growth and margins at risk , impacting the company’s earnings.
As the AI market shows signs of evolving, investors could find better risk-adjusted returns by moving out of Nvidia and into more undervalued semiconductor players, such as Intel. Considering the above factors, Intel may have only one path ahead, and that path is likely up. For Nvidia, however, things could get a little more complicated.
