Investors have been buying Nvidia (NVDA +1.51%) shares like hotcakes over the past several years -- and that's helped the artificial intelligence (AI) leader to jump more than 2,000% since 2020.
And there's plenty of evidence this top AI company has farther to go. The world's No. 1 seller of AI chips has an impressive track record of earnings growth, and the strength of the general AI market, along with Nvidia's plan to keep innovating, should boost revenue in the years to come.
So, investors who choose to buy and hold Nvidia stock could set themselves up for a win over the long run -- especially since the stock offers a solid entry point right now. After a recent dip, it's trading close to its cheapest level in about a year in relation to forward earnings estimates.
Still, Nvidia isn't the only tech company with a promising future -- and others that haven't soared as much may be ripe for a rally. Two that come to mind are e-commerce and cloud giant Amazon (AMZN +0.36%) and Nvidia's AI chip rival Advanced Micro Devices (AMD +0.88%). Should you forget Nvidia and buy these two tech stocks instead? Let's find out.
Image source: Getty Images.
The case for Amazon
Amazon generates billions of dollars in revenue annually thanks to its booming e-commerce and cloud computing businesses. And the company is winning in AI in both of these units. AI has helped Amazon become more efficient across the e-commerce operation, and it's also offered valuable tools to shoppers and sellers on the platform. All this reduces the company's costs -- and by better serving shoppers and sellers, Amazon is likely to keep them coming back.
As for the cloud, Amazon Web Services (AWS) has rapidly turned Amazon's AI investment into revenue. The company has said AWS' annual revenue run rate of $115 billion is thanks to the variety of AI products and services it's offering customers. Since AWS is Amazon's biggest profit driver, this growth is particularly important.
Last year, net sales rose 11% to more than $638 billion, and operating income rose nearly 90% to $68 billion. And AWS' operating income represented almost 60% of that.
There's reason to be optimistic this growth will continue, since Amazon has placed a major focus on AI and continues to expand AWS' offerings -- for example, it recently introduced Amazon Nova, the company's own foundation models that, like Amazon's in-house-developed chips, offer a great option for cost-conscious customers.
NASDAQ: AMZN
Key Data Points
Today, Amazon stock trades for 30x forward earnings estimates -- more expensive than Nvidia, which now trades for 25x.
The case for AMD
AMD is a rival seller of AI chips, but Nvidia remains far ahead with 80% market share. The good news for AMD and its investors, though, is this chip company doesn't necessarily have to beat Nvidia to score its own win in the AI market.
This designer of central processing units (CPUs), the general processors found in computers, and graphics processing units (GPUs), powerful chips that fuel AI applications, offers AI customers an alternative to the higher-priced Nvidia chips. And this has resulted in significant growth in recent times.
Last year, AMD's data center revenue surged 94% to a record of more than $12 billion, and total revenue rose 14% to more than $25 billion. Of course, this is much lower than Nvidia's $130 billion in revenue for the year, but, as mentioned, that's OK. As long as AMD is able to generate solid growth as it has in recent times -- and at a strong level of profitability on sales -- with gross margin of 49% last year, there's reason to be confident about this chip company.
NASDAQ: AMD
Key Data Points
The company says it's been "investing aggressively in AI," which suggests opportunities for additional growth may be just ahead -- especially considering that analysts predict explosive growth for the entire AI market this decade.
Today, AMD trades for 22x forward earnings estimates, so it's cheaper than Nvidia and Amazon.
Are these stocks a better bet than Nvidia right now?
Considering Nvidia is trading at bargain levels right now and remains a top AI company, I wouldn't completely forget about this market star. (And I wouldn't worry too much about overall declines in technology stocks, as I think challenges -- such as concerns about President Trump's tariffs on imports -- won't change any of these compainies' long-term prospects.)
But, as mentioned, AMD is the cheapest today and may be heading for a wave of growth -- and Amazon offers investors a great degree of diversification due to its presence in the e-commerce and cloud markets.
So, while I wouldn't completely cast Nvidia aside, right now I would definitely take a second look at Amazon and AMD -- and consider buying these technology stocks at today's fantastic prices.
