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Artificial intelligence (AI) stocks were the toast of Wall Street last year. The segment was one of the biggest growth drivers in the Nasdaq Composite's 43% rise in 2023, with countless companies benefiting from increased interest in AI.
However, data from Grand View Research suggests the sector is just getting started. The AI market is projected to expand at a compound annual growth rate (CAGR) of 37% through 2030, which would see it exceed a $1 trillion valuation before the end of the decade. So, even stocks that reached new heights last year could still have much to offer new investors.
Nvidia (NASDAQ: NVDA) and Intel (NASDAQ: INTC) are two attractive options, with both companies developing the hardware necessary for training and running AI models. These companies are at considerably different stages of their AI journeys, with one dominating the industry and the other just starting out.
As a result, it's worth asking whether it's better to invest in an established AI stock or one with possibly more room for growth. Let's take a look at whether Nvidia or Intel is the better AI stock this January.
Nvidia
Nvidia's business exploded in 2023, with its stock up more than 245% since last January. The company's years of dominance in graphics processing units (GPUs) allowed it to get a head start in AI as its chips became the preferred hardware for developers everywhere.
While chip rivals like Advanced Micro Devices and Intel have vested interests in the GPU sector, they have focused primarily on fighting over share of the central processing unit (CPU) market. This has allowed Nvidia a clear path to dominance in GPUs, perfectly positioning it to thrive amid an AI boom.
In its third quarter of fiscal 2024 (which ended October 2023), Nvidia posted revenue growth of 206% year over year, hitting over $18 billion. Meanwhile, operating income soared 1,600% to $10 billion. Much of the quarter's growth was owed to a 279% spike in data center revenue, reflecting increased sales of AI GPUs.
Nvidia will have to contend with a more competitive chip market this year as AMD and Intel begin shipping their respective GPUs. However, Nvidia has a major lead that will be challenging to overcome.
Additionally, with the market expanding at a CAGR of 37%, there may be room for Nvidia to retain its dominance as the market welcomes newcomers.
Intel
Intel hasn't had it easy in recent years. This chart shows its revenue, operating income, and free cash flow have plunged since 2020.
The company enjoyed years of almost unrivaled dominance in CPUs, which saw it grow complacent as its technology started to stagnate. In 2020, Apple acted on years of frustration with Intel's chips, ending a 15-year partnership in favor of chips developed in-house. Meanwhile, AMD's powerful line of Ryzen CPUs has seen the company consistently steal market share from Intel. Since the first quarter of 2017, Intel's share of the CPU market has dwindled from 82% to 61% in Q4 2023.