The artificial intelligence (AI) boom is creating massive winners, but not every stock riding this wave will deliver the same type of returns for investors.
Nvidia (NVDA +1.67%) and Advanced Micro Devices (AMD 0.03%) are two of the biggest names powering the AI revolution, and both are seeing explosive demand for their chips. While the AI supercycle may be big enough for both companies to thrive, one stock still stands out as the better buy right now.
The reason comes down to how each company is positioned within the AI ecosystem and how much of that opportunity is already priced into their stocks.
Image source: The Motley Fool.
Nvidia: The king of AI infrastructure
Nvidia has been the biggest winner of the AI infrastructure build-out thus far. The company has seen massive growth over the years, as its graphics processing units (GPUs) are the primary chips used to train the large language models (LLMs) that power AI. This has propelled its revenue to go from less than $17 billion in fiscal 2021 (ended January 2021) to $216 billion in fiscal 2026. Along the way, Nvidia has become the largest company in the world with an over $4 trillion market cap.
Nvidia's dominance in AI model training stems from its CUDA software platform, which is where most foundational AI code has been written and optimized for its chips. This has helped it establish about a 90% market share in the GPU space. However, the company is not resting on its laurels and has been busy positioning itself for the next phase of AI. This includes the licensing of Groq's technology and hiring of its employees to incorporate language processing units (LPUs) built for inference into its ecosystem.
Today, Nvidia is much more than a chipmaker. It's turned itself into an entire AI infrastructure provider, which positions it to continue to be a solid AI winner.
NASDAQ: NVDA
Key Data Points
AMD: Riding the next big AI trends
While AMD has played second fiddle to Nvidia in the data center GPU market, the company is well positioned for two of the next biggest trends in AI: inference and agentic AI. While Nvidia has created a wide moat in LLM training, it's not nearly as deep in inference, which is predicted to eventually become the much larger of the two markets.
While it came at the cost of warrants for its stock, AMD secured two massive GPU deals from two of the biggest spenders on AI infrastructure in OpenAI and Meta Platforms. The size of the deals will essentially force both companies to incorporate AMD's competing ROCm software into their ecosystems, and both undoubtedly plan to use AMD's GPUs for inference, where it has been able to carve out a solid niche. The deals will bring AMD hundreds of millions in new revenue and incentivize both customers to support the company, given their newfound ownership.
However, AMD's most exciting opportunity is in data center central processing units (CPUs), where it is currently the market leader. With the rise in AI agents, CPU demand is expected to explode, as these chips will be needed to provide sequential logic and workflow management that acts as the brain that tells the AI's muscles (the GPUs) exactly what to do next. This is the next huge market for AI infrastructure, and AMD is sitting right in the middle of it.
NASDAQ: AMD
Key Data Points
The winner
Both Nvidia and AMD are poised to benefit from the AI supercycle, and each could deliver solid long-term returns as AI infrastructure demand continues to surge. However, from an investment standpoint, one stock clearly stands out.
While Nvidia's leadership in AI is undeniable, it is already the largest company in the world. AMD, meanwhile, is a much smaller company and has an enormous opportunity in data center CPUs, while its deals with OpenAI and Meta will provide it with huge growth on the GPU side. For investors looking to capitalize on the next phase of the AI boom, AMD is the stock to own.
