Key Points
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Chipmakers Broadcom and AMD are riding on powerful tailwinds from the AI megatrend, and will continue to do so for years to come.
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Nvidia’s shares are cheaper, and the company’s dominance in GPUs isn’t going away any time soon.
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Nvidia’s recent sales and earnings growth show that the company continues to benefit from the AI boom.
- 10 stocks we like better than Nvidia ›
Artificial intelligence (AI) stocks have already brought impressive returns for many investors in just a few short years. And two chip stocks that have soared recently are Broadcom (NASDAQ: AVGO) and Advanced Micro Devices (NASDAQ: AMD).
Both companies are riding the AI wave. Demand for AMD’s graphics processing units (GPUs) and central processing units (CPUs) pushed its data center revenue to more than double year over year in the most recent quarter. Meanwhile, Broadcom is playing an increasingly important role as a leading designer of custom AI processors for customers such as OpenAI, Alphabet, and Anthropic.
Missed AI’s “Act 1”? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout. Continue »
But AMD’s and Broadcom’s unique positions in the AI space don’t hold a candle to Nvidia‘s (NASDAQ: NVDA) chip dominance. And investors looking for a good deal on an AI stock would be smart to consider buying Nvidia, given its lower valuation relative to AMD and Broadcom.
Here’s why Nvidia is worth buying right now.
Image source: The Motley Fool.
Its shares are well priced by nearly any standard
AMD is trading at a trailing price-to-earnings (P/E) ratio of 131, and Broadcom’s stock has a P/E ratio of 46. Meanwhile, Nvidia’s stock is trading at just 27 times the company’s trailing earnings.
Not only is that less expensive than some of its peers, but it’s also cheaper than the tech sector average P/E ratio of about 33.
Cheap AI stocks aren’t easy to come by these days — especially for companies experiencing significant sales and earnings growth. At a time when many investors are becoming more skeptical of the lofty valuations the market has put on some high-flying AI stocks, Nvidia still looks like a great deal.
Nvidia’s sales and earnings are still very impressive
It would be easy to assume that after the fantastic growth it has delivered over the past several years, Nvidia’s top-line expansion would have to slow down. But the company’s recently reported fiscal 2027 second-quarter results show that Nvidia still has much more in the tank.
Sales more than doubled from the year-ago quarter to $96.2 billion, and net income soared by 126% to $59.7 billion.
What’s shocking is that Nvidia’s management continues to issue guidance for strong growth. The company’s revenue outlook for the fiscal third quarter calls for $108 billion — a 90% increase from the prior-year quarter.
The fuel for Nvidia’s business has been tech companies’ spending spree on AI infrastructure; capital expenditures by the four hyperscalers alone are expected to reach $725 billion this year, and they aren’t the only ones building data centers. And more is on the way. S&P Global estimates that AI companies will spend more than $1.3 trillion on capex next year.
Nvidia continues to dominate the GPU market
The AI market is becoming very competitive, and companies’ needs in terms of computing power are evolving. Broadcom is benefiting from this shift by designing custom processors for numerous large players that are optimized to handle specific AI workloads.
Earlier this year, Broadcom inked a multiyear deal with Alphabet to design many of the company’s future Tensor Processing Units (TPUs). OpenAI, Anthropic, and Meta Platforms are also taking advantage of Broadcom’s design acumen to develop their own custom processors, and surging demand for those chips is forecast to double Broadcom’s AI revenue this year — and double it again in 2028, according to management.
Similarly, AMD is benefiting from the rising need for both CPUs in data centers. During earlier phases of the AI megatrend, the ratio of GPUs to CPUs in data centers was around 8 to 1. But in the agentic AI phase that’s coming, that’s shifting to a 1-to-1 ratio. So AMD — long a significant supplier of data center CPUs — is leaning further into that market to meet surging demand. AMD’s management says its total addressable market for server CPUs will be $220 billion by 2030.
But as impressive as all of that is, Broadcom and AMD don’t hold a candle to Nvidia in their respective markets. Even with rising competition, Nvidia dominates GPU sales with an estimated 86% market share, a staggering achievement.
When you add up Nvidia’s robust lead in GPUs, its surging sales and earnings, and the fact that the company’s stock is cheaper than its peers and the broader tech sector, buying Nvidia stock looks like a no-brainer right now.
Should you buy stock in Nvidia right now?
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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Broadcom, Meta Platforms, Nvidia, and S&P Global. The Motley Fool has a disclosure policy.
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