Nvidia (NVDA 1.28%) and Navitas (NVTS 6.18%) represent two different ways to invest in the booming artificial intelligence (AI) market. Nvidia is the world's largest producer of data center GPUs, which are used to process complex AI tasks. Navitas produces next-gen chips for AI-oriented data centers, but it also serves a wide range of non-AI markets.
Over the past 12 months, Nvidia's stock rose nearly 30% as Navitas' stock rallied more than 165%. Could this smaller niche chipmaker continue to outperform Nvidia over the next year?
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The differences between Nvidia and Navitas
Nvidia once generated most of its revenue by selling GPUs for gaming PCs. Today, it generates most of its revenue from the data center market. Most of the world's top AI companies -- including OpenAI, Microsoft, Meta, and Alphabet's Google -- use its GPUs to power their AI applications.
Nvidia controls more than 90% of the entire discrete GPU market, and it locks in its data center customers with CUDA (Compute Unified Device Architecture), its proprietary programming platform for its own chips. The stickiness of that ecosystem should widen its moat against cheaper data center GPU makers like AMD (AMD 3.24%) and keep big tech companies tethered to it even as they develop their own first-party AI accelerator chips.
NASDAQ: NVDA
Key Data Points
Navitas produces gallium nitride (GaN) and silicon carbide (SiC) power chips that are faster, more power-efficient, and more temperature-resistant than traditional silicon chips. GaN chips are cheaper, faster, and operate at low-to-mid voltages -- which makes them ideal for phone chargers, laptop chargers, and data center servers. SiC chips are generally slower, more expensive, and operate at mid-to-high voltages, so they're often used in high-voltage EV powertrains, industrial systems, and data center power supplies.
Navitas originally generated most of its revenue from its GaNFast Power ICs, which bundle together switching, sensing, control, and security features on a single integrated circuit. However, it expanded into the SiC market through its 2022 acquisition of GeneSiC, significantly increasing its exposure to the higher-growth EV and data center markets.
Last year, Nvidia agreed to install Navitas' GaN and SiC chips into its own AI data centers to support its next-gen 800 V HVDC power architecture. That deal will significantly boost Navitas' exposure to the AI market, but it won't start mass producing those chips until 2027.
NASDAQ: NVTS
Key Data Points
Which company is growing faster?
From fiscal 2025 (which ended last January) to fiscal 2028, analysts expect Nvidia's revenue and earnings per share (EPS) to grow at a CAGR of 47% and 45%, respectively. The secular expansion of the AI market should fuel that explosive growth.
It might face more competitors and messier trade restrictions over the next few years, but it should continue to sell the best picks and shovels for the AI gold rush for the foreseeable future. The rollout of its new Rubin platform, which merges a CPU and GPU on a 3nm chip, and the introduction of its next-gen Ferryman GPU architecture should reinforce that reputation.
Navitas faces more near-term challenges as the macro headwinds drive its EV, solar, and industrial customers to right-size their inventories. As a result, analysts expect its revenue to decline by 45% in 2025 and 21% in 2026, before finally rising by 84% in 2027. However, that would still represent a negative three-year CAGR of 7% from 2024 -- and it's expected to stay unprofitable.
Navitas' most significant catalyst for 2027 will be its power chip deal with Nvidia. If it successfully ramps up chip production for that partnership, its AI-oriented revenues will surge, reducing the importance of its macro-sensitive businesses. But if it struggles with delays or supply chain constraints, it could miss Wall Street's optimistic 2027 targets.
Which stock is a better value?
Nvidia's stock still looks reasonably valued at 25 times its projected EPS for fiscal 2027 (which mostly lines up with calendar 2026) and 13 times its projected sales. Navitas, which can't be valued by its earnings yet, looks a lot pricier at 63 times this year's sales.
Therefore, it seems like Nvidia still has plenty of room to run as the AI market expands. Meanwhile, Navitas' valuation was likely inflated by the hype regarding its power chip deal with Nvidia -- as well as the long-term growth potential of the GaN and SiC markets. It could struggle to maintain that premium valuation if its core EV, solar, and industrial markets don't stabilize.
Both stocks could climb higher over the next decade, but Nvidia is clearly a better buy right now. It's bigger, it's growing faster, it has a wider moat, and its stock looks fundamentally cheaper.
