Nvidia (NVDA +1.68%) stole the show in the first half of the year, soaring about 150% and reporting triple-digit gains in earnings. The company garnered even more attention when it announced and then completed a 10-for-1 stock split, a move to bring its stock price down from more than $1,000. Nvidia still makes a great buy today as this company dominates the artificial intelligence (AI) chip market -- and demand in this high-growth market could continue to climb for quite some time.
But today two other players make better bargain buys than Nvidia. These stocks are less expensive than the leading chip designer, and they also stand to gain from demand for AI products and services in the coming months and years. So now is a great time to get in on these companies and potentially benefit as their earnings take off.
Image source: Getty Images.
1. Intel
Intel (INTC 0.07%) didn't start off with a bang in the AI race. The company is a longtime leader in the central processing unit market -- these are the main processors in any given computer -- but fell behind when it comes to powering AI platforms.
The company has reached a key turning point in recent times, though, putting a big focus on AI and even launching a new portfolio of AI products. These include the Intel Core Ultra mobile processor family to support the AI personal computer, or a high-powered PC that can handle AI tasks. And Intel has launched the Gaudi 3 AI accelerator, a chip that's delivered 50% better inference and 40% better power efficiency than Nvidia's top-selling H100.
Intel's Gaudi 3 is considerably cheaper than the Nvidia product, offering Intel the opportunity to carve out market share among cost-conscious customers.
On top of this, Intel also recently opened its chip manufacturing network to others -- and aims to become the world's second-biggest foundry by 2030. This won't result in immediate gains to earnings, but if Intel is successful, over time this could become a major revenue driver.
NASDAQ: INTC
Key Data Points
Today, Intel shares trade for 28 times forward earnings estimates, while Nvidia stock trades for 47. It's true that Nvidia's earnings growth story has been far more compelling than that of Intel in recent quarters, but Intel may be on the verge of turning things around. Even if the company never reaches the level of Nvidia when it comes to serving the AI market, Intel still could become highly successful -- and the stock may take off as this story unfolds.
2. Oracle
Oracle (ORCL 1.84%) may be far behind leader Amazon when it comes to cloud market share -- Amazon Web Services is the world's biggest cloud services provider -- but Oracle is growing fast. Proof of this is in the third quarter of the 2024 fiscal year, Oracle's total cloud revenue surpassed the company's license support revenue for the first time ever.
AI customers have flocked to Oracle's variety of cloud services, from public cloud to sovereign cloud, and even Oracle Alloy -- which allows partners to become cloud providers. Customers also like Oracle's multi-cloud services, allowing them to easily deploy projects across Oracle and other providers such as Microsoft. And Oracle also offers its services at lower prices than its rivals, an element that clearly could appeal to customers.
NYSE: ORCL
Key Data Points
All of this has translated into accelerating demand and revenue growth, as we can see by looking at the company's most recent earnings reports. Over the past two quarters, Oracle has signed its largest sales contracts ever, with customers aiming to train large language models in the Oracle cloud. This helped remaining performance obligations (RPO), or future revenue the company expects from contracts, to climb 44% to $98 billion. And the company expects this trend to push revenue growth into the double digits for the full year.
The company also has said in recent times that demand for its Gen2 AI infrastructure is surpassing supply even as the company expands its data centers.
Meanwhile, Oracle stock trades for only 23 times forward earnings estimates, dirt cheap considering AI demand and the company's revenue momentum. And that makes Oracle a top bargain AI stock to buy now and hold onto as its exciting growth story picks up speed.
