Semiconductor stocks have been on the rise in the past year, with the PHLX Semiconductor Sector index jumping 61%. Two key players in the industry, Nvidia and Advanced Micro Devices (AMD), have seen significant gains with Nvidia up 252% and AMD up 128% in the past year. The semiconductor industry is expected to accelerate in 2024, with global semiconductor revenue estimated to increase by 17%.
Nvidia has positioned itself as a leader in the market, particularly in the field of artificial intelligence (AI) chips. The demand for AI chips is expected to grow rapidly in the coming years, and Nvidia is predicted to maintain a dominant 85% share of the AI chip market in 2024. Analysts estimate that the company’s data center revenue could reach $65 billion in fiscal 2025, driven by the strong demand for AI chips. Additionally, Nvidia’s graphics cards for gaming PCs are expected to see increased demand due to a turnaround in the market and the adoption of AI-enabled computers. Overall, the company’s revenue is expected to jump 56% in fiscal 2025.
On the other hand, AMD relies on selling central processing units (CPUs), graphics cards, and semi-custom chips for PCs and gaming consoles. The recovery in the PC market is expected to be a catalyst for AMD in 2024, with Canalys forecasting an 8% increase in PC shipments. However, the gaming segment could weigh on AMD’s performance, as Nvidia is the dominant player in the gaming graphics cards market. While AMD’s AI-focused business has potential, it has yet to take off compared to Nvidia’s.
In terms of growth and valuation, Nvidia appears to be in a better position. Analysts forecast a faster growth rate for Nvidia, with its revenue estimated to increase by 66% in 2025, compared to a 16.6% growth rate for AMD in 2024. Additionally, Nvidia is relatively cheaper than AMD in terms of forward and trailing earnings multiples.
Investors looking to benefit from the semiconductor industry’s growth in 2024 and capitalize on AI trends may find Nvidia to be the better choice. With its leading position in AI chips and strong growth prospects, Nvidia has the potential to outperform AMD in the coming years.
The source of the article is from the blog toumai.es