There are plenty of ways to play the artificial intelligence (AI) craze that's dominating Wall Street these days. The tried-and-true stock is Nvidia (NVDA 1.56%), the designer of the advanced chips that are the tech world's most popular choices for running large language models, generative AI, and other cutting-edge functions. Nvidia has made a lot of investors richer over the last few years, and has now grown to become the largest publicly traded company in the world, with a market capitalization approaching $4.4 trillion.
But another possible pick for tech sector investors is Intel (INTC +1.14%), which is more of a legacy computing company. Intel has lagged badly in the AI race, particularly with its foundry division, but it could benefit from the recent investment by the U.S. government, which has taken a 10% stake in the company.
Intel stock is up by 20% so far in 2025. Could it be a better AI investment from here than Nvidia?
Image source: Intel.
The market position for Nvidia
Nvidia's graphics processing units (GPUs) are the industry standard when it comes to providing the types of computing power required to teach AI models and deploy them in real-world applications. Its CUDA parallel computing platform lets developers write code and build applications on Nvidia GPUs. Every GPU is a parallel processor -- capable of performing thousands of operations at once. The CUDA platform helps developers take certain types of computationally heavy processes and divide them into small individual threads that can be handled separately and simultaneously by such chips, thus getting more effectiveness out of them. The results are faster processing times and a more efficient use of computing resources.
NASDAQ: NVDA
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That's particularly important because it keeps hyperscalers and other developers locked into the Nvidia platform when they take their projects live -- because CUDA can only be run on Nvidia's chips. Its Hopper GPUs were the gold standard for GPUs, but now it's selling its new Blackwell architecture chips, which deliver faster performance with lower power consumption. Blackwell sales generated $11 billion for Nvidia in the first quarter they were available -- its fiscal 2025 Q4, which ended Jan. 26 -- and boomed to $27 billion in the first quarter of its fiscal 2026. Blackwell sales rose another 17% to roughly $31.6 billion in fiscal Q2, which ended July 27. That was about 76% of the company's data center sales. CEO Jensen Huang described demand for the Blackwell GPUs as "extraordinary."
The market position for Intel
Intel, meanwhile, is the market leader in the data center central processing unit (CPU) space, but it's facing serious challenges from rivals Advanced Micro Devices and Arm Holdings. Analysts with Mercury Research and International Data Corporation (IDC) predict that Intel's market share will slip to 55% this year as AMD's rises to 36%. Further, they project that Intel's market share will fall below 50% by 2027, with AMD getting about 40% and Arm getting between 10% and 12% of the market.
NASDAQ: INTC
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Intel has also been attempting to build up its third-party foundry business, but that unit has struggled to find its footing. While Taiwan Semiconductor Manufacturing is still getting the lion's share of the world's chip fabrication business, Intel has had trouble landing clients. Management has announced that it's shelving its plans to build chip foundries in Germany and Poland, and will slow the pace of construction at its foundry project in Ohio.
The company is investing more than $100 billion in its domestic foundry business, with its next plant expected to open this year in Arizona.
"We are also taking the actions needed to build a more financially disciplined foundry," CEO Lip-Bu Tan said in the fiscal Q2 earnings press release. "It's going to take time, but we see clear opportunities to enhance our competitive position, improve our profitability and create long-term shareholder value."
What's moving Intel stock now
While Intel is in a weaker financial position than Nvidia, some investors are speculating that it could be hitting a bottom -- especially now that the U.S. government has taken a stake in the business. The Trump administration announced in August that it would purchase 433.3 million shares of Intel stock, taking a 9.9% stake in the company. The U.S. also gets a five-year warrant for $20 per share to take an additional 5% of shares should Intel not own a majority of its foundry business.
These moves are part of a push by Washington to encourage the development and manufacturing of high-end semiconductors in the U.S.
"As the only semiconductor company that does leading-edge logic R&D and manufacturing in the U.S., Intel is deeply committed to ensuring the world's most advanced technologies are American made," Tan said.
There's still skepticism about Intel
Investors have already baked some high expectations into Intel's stock price. Its forward price-to-earnings ratio, which a couple of years ago was roughly in line with Nvidia's, has surged higher since then, and is now approaching 200, while Nvidia trades at a more reasonable 38.
NVDA PE Ratio (Forward) data by YCharts.
Intel's stock hasn't traded at levels like this in two decades. "The stock looks incredibly expensive here," Wayne Kaufman, chief market analyst at Phoenix Financial Services, told Bloomberg. "That kind of multiple is a bet that the government will push Intel so hard on customers that it becomes a winner."
Most analysts who revisited Intel following the Trump administration announcement reiterated their hold positions, but also are projecting significant downside for the stock. Bernstein's Stacy Rasgon has a $21 12-month price target on Intel, which would amount to a roughly 12% downside, while TD Cowen's Joshua Buchalter has a $20 price target.
Intel has had a net loss of $21 billion over its last four reported quarters, and I don't see a path for the company to turn its finances around abruptly enough to justify its frothy forward P/E. While its still-downtrodden share price might represent a buying opportunity for investors, I think it's a shaky bet at best considering that Intel is playing catch-up in AI.
Intel's new government backing gives it a potential tailwind, but Nvidia's leadership in GPUs, its CUDA platform, and its AI infrastructure make it a safer bet for long-term investors.
