Could these 4 Nvidia competitors deliver Nvidia-like gains that you missed out on?

Nick Sundich Nick Sundich, July 10, 2024

If you missed out on buying Nvidia (NDQ:NVDA), you may consider looking at Nvidia competitors. As of July 2024, Nvidia has gained over 3,000% in 5 years and is valued at over US$3tn. Investors have perceived the company as one that will gain from the rise in Artificial Intelligence (AI), not just because AI is all the hype, but because Nvidia’s bottom line has given good reason to believe. Where does Nvidia fit in the AI boom? Because graphics processing units (GPUs) are needed to power more complicated language models, and Nvidia is not just a specialist in this field, but the market leader with an ~80% share.

But at US$3tn, is there room for the share price to go up any more? That is up for debate and another article. Yet, for those investors who think the opportunity for high returns is no longer there, could there be an opportunity by investing in some of Nvidia’s peers? Let’s take a look.

 

4 Nvidia competitors

 

Broadcom (NDQ:AVGO)

Broadcom has enjoyed a stellar run in the last 5 years too, sitting on a 500% gain. It specialises in custom chips designed for a clients’ specific workloads as opposed to general-purpose AI chips. Earlier in 2024, Broadcom bought cloud computing company VMWare that builds virtual machines capable of running apps on software rather than physical computers. This provides it some protection from any downturn in the AI hype.

Also in BroadComm’s favour is that the fact that the mean target price amongst analysts is 10% higher than its current share price, and it trades at a P/E of 28.1x for FY25 and a PEG of 1.7x. Nvidia trades at a P/E of 46.4x and its mean target price is just 5% above consensus. A forthcoming 10-1 stock split for Broadcom could lead to more investors buying in the coming months.

Ultimately, we believe it is vulnerable to adverse investor reactions if its quarterly results do not satisfy investors enough – just look at at what happened when it guided to US$50bn in CY24 revenue, despite being 36% higher year-on-year. This jump was because of the VMWare acquisition, otherwise it would have been just 11% growth.

 

Qualcomm (NDQ:QCOM)

Now here’s a name investors may be familiar with, being a long-term chip maker for Apple. Qualcomm is the world’s second largest chip designer, only behind Nvidia, but is the largest in so-called ‘edge AI’. This is where data and algorithms are processed directly from an endpoint device rather than in a data centre. With advantages in making chips for modems and wireless technology, it is well positioned, in our view.

However, Qualcomm is expected to grow slower than Nvidia and even Broadcom in the next couple of years. Its mean target share price is just 2% higher than today’s and its revenue is expected to grow by just 7% from $35.8bn to $38.4bn in the current financial year. Its P/E appears more reasonable 20.8x, although its PEG is higher than Nvidia’s and Qualcomm’s.

 

Texas Instruments (NDQ:TXN)

Texas Instruments (TI) is focused on industrial and automotive applications. While there is AI hype surrounding this company, there are short-term cyclical weaknesses in these specific sectors. Its growth in the last decade has been relatively stable at a 10% CAGR, although this may not impress investors, even if it holds.

Unlike Nvidia, Qualcomm and Broadcom, TI still makes many of its own chips where the others rely on TSMC’s manufacturing facilities. According to consensus estimates, TI’s mean target price is 9% lower than the current share price and its revenue is expected to retreat by 10% in CY24. It is priced at a 37.9x P/E and 13.2x PEG. Add this all up, and it does not look appealing to us.

 

Intel (NDQ:INTC)

Intel is a well known name in the chip-making sector. But it is down 33% in CY24 and has never got back to its all time highs, reached during the dot com boom. Some analysts have used this comparison to argue Nvidia will eventually crash.

 

 

There’s no doubt Intel is behind Nvidia in AI, but it is not completely out of the race yet. It specialises in central processing units (CPUs), but has lost market share to AMD. Intel is trying to transition to a foundry model, building plants of its own across the US. It recently unveiled new AI chips, including the Gaudi3 AI accelerator that it claims outperforms Nvidia’s GPUs by 50% in inference and 40% in power efficiency. During the March quarter of 2024, Intel’s AI segment grew its bottom line by 2000%.

The company’s PEG is only 0.6x, its P/E is 29.2x and the mean target price amongst analysts is 25% higher than the current price. While revenue growth is expected to be flat in CY24, growth is expected to accelerate in the years ahead with 14% revenue growth in CY25.

 

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