Stocks like Nvidia, which is leading the charge in artificial intelligence (AI) and graphics processing unit (GPU) technology, have become highly sought after for their potential to deliver substantial returns.
However, if we step back for a second and take a deep breath, it becomes all too obvious how easy it is to fall victim to hype and FOMO.
While Nvidia continues to dominate the headlines, savvy investors are looking for other opportunities that offer similar growth prospects without the premium price tag.
Founded in 1993, Nvidia is a leader in the semiconductor industry, renowned primarily for its powerful graphics processing units.
The company’s excellence in this field has made it indispensable for a variety of dynamic industries — including autonomous vehicles, machine learning, artificial intelligence, data centers, gaming and cloud computing.
It’s hard to overstate how dominant the company is in the field of GPUs, commanding an impressive 88% of the market share.(1) However, most of its impressive growth over the last two years has been due to AI. Data centers made up $15 billion out of $26.91 billion in total revenue last year.(2)
Nvidia might be an industry leader, but that doesn’t necessarily make it the best stock to purchase. Legitimate concerns regarding a potential bubble or overvaluation exist.
Avoiding these drawbacks means looking beyond high-profile stocks like Nvidia to other tech stocks at the forefront of technological advancement and market expansion.
Often seen as Nvidia’s primary competition (at least before the AI boom), Advanced Micro Devices (AMD) is a semiconductor company that’s present in both the GPU and central processing unit (CPU) markets. It’s the second-largest producer of GPUs, commanding a 12% market share.(2) Additionally, AMD has managed to secure 23.9% of the server CPU market, representing a healthy growth of 5% YoY.(3) On the whole, of all the stocks like Nvidia, this is the clearest comparison.
Comparison with Nvidia
AMD’s Radeon series is a direct competitor to Nvidia’s GeForce lineup. Meanwhile, in the professional graphics arena, AMD’s Radeon Pro competes with Nvidia’s Quadro, catering to professionals in design, engineering and scientific research.
Both companies have expanded into the data center market, with AMD’s EPYC processors and Nvidia’s data center GPUs offering solutions for AI and machine learning workloads.
AMD leverages its CPU and GPU capabilities to provide comprehensive solutions, while Nvidia focuses on its GPU strength and AI software ecosystem.
Nvidia and AMD are industry leaders — so it should come as no surprise that they earmark large sums for research and development (R&D). For fiscal year 2024, AMD’s R&D expenditure was $5.8 billion — or around 25.9% of the company’s revenue.(4) Nvidia’s R&D budget was slightly higher, at $8.7 billion, but it represented a significantly smaller 14.9% of revenue.(2)
Growth potential
In terms of new developments, AMD has several plates spinning. The company’s new Zen 5 CPU architecture was released on August 15, 2024, while its RDNA 4 GPU architecture is slated for either late 2024 or early 2025.(5), (6)
AMD is also focused on enhancing its Instinct MI300 series GPUs, designed for AI workloads, to capture a larger share of the AI and machine learning market.
Long been a titan in the semiconductor industry, Intel Corporation (INTC) is renowned for its microprocessor innovations that have powered countless computers worldwide.
Historically, Intel’s x86 architecture became the standard for personal computers, and its processors have been integral to the growth of the PC and server markets.
Today, Intel’s product range includes a variety of CPUs, GPUs and AI accelerators designed for diverse applications, from consumer electronics to enterprise data centers.
Despite its historical significance, Intel is currently navigating a challenging landscape. The company has faced significant competitive pressures and financial difficulties, with its Q2 2024 financial results revealing a decline in net revenue to $12.8 billion, down 1% from the previous year.(7)
These challenges have prompted Intel to embark on a $10 billion cost reduction plan aimed at increasing efficiency and competitiveness.
Comparison with Nvidia
Intel’s strengths lie in its extensive CPU lineup and integrated graphics solutions, whereas Nvidia dominates the discrete GPU market, particularly in areas such as gaming, AI and machine learning.
Intel is actively expanding its AI and data center capabilities, introducing products like the Intel Gaudi 3 AI accelerator, which aims to provide cost-effective AI solutions.
Growth potential
Intel’s growth potential hinges on several strategic initiatives aimed at overcoming current challenges and capitalizing on emerging opportunities. The company is pursuing its “five-nodes-in-four-years” strategy, which includes launching advanced process nodes like Intel 18A to enhance manufacturing capabilities.
Additionally, the company is making strategic acquisitions and divestitures to diversify its business portfolio. Notably, the acquisition of Silicon Mobility SAS aligns with Intel’s focus on AI and electric vehicle (EV) technologies, expanding its reach into the automotive market.(8)
While it is currently in hot water, and you might be seeing a lot of media coverage surrounding the company’s recent troubles, we’d consider that an opportunity to purchase the stock at a more appealing price-to-earnings (P/E) ratio.
Qualcomm’s Snapdragon processors power a vast majority of Android smartphones in the world today.
However, the company’s business isn’t tied solely to the mobile device market — Qualcomm (QCOM) doubles as a telecom company, having developed wireless technologies such as 4G LTE and 5G.
The company also holds several key patents in this area, which serve as an (at least partial) economic moat.
However, the results are quite a bit more impressive when we hone in on the smartphone market — where Qualcomm maintains a 23% share of global smartphone application processor (AP) market by shipments and 34% by revenue.(9), (10)
Comparison with Nvidia
Qualcomm specializes in AI for mobile and edge devices, integrating AI capabilities into its Snapdragon processors.
This approach allows for efficient on-device processing, enabling applications like image recognition, natural language processing and augmented reality without relying on cloud-based solutions.
In contrast, Nvidia leads in AI for high-performance computing and data centers. Nvidia’s GPUs are renowned for their ability to train deep learning models and perform complex AI computations.
Growth potential
Qualcomm continues to invest heavily in research and development, allocating over $8 billion annually to advance its technology in AI, 5G and other emerging areas, which represents approximately 20% of the business’s total revenue.(11)
On top of that, the company has significantly invested in expansion plans tied to the Internet of Things (IoT) in areas such as smart cities and the automotive industry by way of telematics and big data processing.
Out of all the stocks like Nvidia that we’ll be covering, Qualcomm is the cheapest at the time of writing — with a P/E ratio of just 21.(12) Value investors should consider purchasing what is likely the most affordable semiconductor stock — of course, provided that they have enough time on their hands for capital appreciation to set in.
Broadcom’s product range is much more focused on infrastructure. The company’s semiconductor products include data center switches and routers, Ethernet NICs, optical components and wireless connectivity solutions.
On top of that, Broadcom (AVGO) maintains a presence in the infrastructure and enterprise software space, with solutions focused on cybersecurity, mainframe software and managing IT operations.
Comparison with Nvidia
When contrasting Broadcom and Nvidia, an interesting parallel pops up. Whereas Nvidia is looking to (and succeeding in) capturing market share and profits through its custom GPU solutions, Broadcom is achieving similar success with its custom application-specific integrated circuits (ASICs) tailored for major tech companies like Alphabet (GOOGL) and Meta Platforms (META).
Nvidia’s custom GPUs provide optimized performance for specific applications such as gaming and cloud computing, enabling partners to leverage cutting-edge graphics and AI capabilities. On the other hand, Broadcom’s custom ASICs tend to focus on delivering specialized functionality and efficiency for data centers and networking.
Growth potential
In terms of future outlook, Broadcom has secured a strong position in the 5G chipset market, second only to Qualcomm, and generated $5.9 billion in 5G-related revenues in 2023.(13) AI-related revenue is projected to reach $10 billion just in 2024, and the company spends around $5 billion on R&D each year, representing 14% of total 2023 revenue.(14), (15), (16)
If you’re interested in stocks similar to Nvidia, Broadcom stock is down 15% over the last month, but trading volume has held strong.
Micron is one of the top three memory manufacturers globally, alongside Samsung and SK Hynix, holding approximately 23% of the global DRAM market and 11% of the NAND flash market.(17) In both of these areas, Micron (MU) is on the cutting edge, holding more than 47,000 patents in total.(18)
Comparison with Nvidia
Micron’s 1α (1-alpha) DRAM technology allows for increased memory density and reduced power consumption, making it an ideal solution for the high-speed data processing that will be required by data centers and AI applications, which will rely on large datasets.
In tandem with that, Micron’s 176-layer NAND technology is crucial for high-performance storage, giving the company plenty of inroads with mobile devices, PCs and enterprise needs.
While Nvidia’s GPUs are the backbone of AI training and inference due to their parallel processing capabilities, Micron’s high-bandwidth memory (HBM) solutions support these workloads by ensuring rapid data transfer between the GPU and memory.
Growth potential
Micron is also embarking on a wide-scale manufacturing project, with plans to spend some $150 billion through 2031 to create advanced manufacturing capabilities and R&D centers in Boise, Idaho and Clay, New York.(19)
Apart from the obvious benefit of economies of scale, if successful, this move could position MU as a key player immune to geopolitical instability and supply-chain issues in the next decade.
Here’s a fun fact: a couple of years ago, Nvidia tried to buy ARM Holdings (ARM) in a deal that was ultimately foiled by regulatory bodies. However, Nvidia recently disclosed a $147.3 million stake in the company, causing a notable price surge in February 2024.(20)
Unlike traditional semiconductor companies, ARM’s business model is centered around licensing its processor designs to a wide array of manufacturers, including tech giants like Apple (AAPL), Samsung and Qualcomm.
This approach has enabled ARM to establish a broad market presence across multiple sectors, including mobile, automotive and data centers.
Comparison with Nvidia
ARM’s low-power designs are critical in enabling the development of cutting-edge, power-efficient technologies that cater to the growing demand for high-performance, low-energy consumption solutions.
ARM’s architecture is well-suited for edge AI applications, where power efficiency is crucial, providing a competitive edge against Nvidia’s high-performance but power-hungry GPUs.
While Nvidia continues to dominate the high-end AI market with its powerful GPUs, ARM’s strategy focuses on broadening AI accessibility by enabling efficient processing across a wider range of devices.
Growth potential
Currently, the company spends somewhere around $1.1 billion per year on R&D — just over a third of total yearly revenue.(21)
Looking ahead, ARM aims to solidify its position in data centers with products like the Neoverse platform, which targets cloud service providers and enterprises seeking efficient data processing solutions.
The expected growth in AI and IoT sectors presents ARM with significant opportunities to expand its influence and drive innovation across its processor lineup.
When drafting this list, we focused on a few key criteria to evaluate the businesses we thought we should include.
First and foremost was market presence — we didn’t want to bring you a list of starry-eyed startups that could bring you gains in a couple of years. Each company on this list has a substantial market cap and a long, vetted history in the semiconductor industry.
Next was innovation — Nvidia’s example has shown that the next big winners in the tech space won’t achieve their success via units delivered. Cutting-edge solutions with the potential to transform and disrupt entire industries were what we were after. Accordingly, each entry on the list allocates a lot of funds to R&D.
Finally, we always kept one simple concept in mind — the sympathy play. Each of these companies is positioned in a way that the growth of other industries, be it self-driving vehicles, artificial intelligence or data centers, will positively impact the company’s growth in a virtuous cycle.
Before we end things, we want to make one thing clear — we’re not implying that Nvidia is a bad investment. However, in an industry where technological advancements and market dynamics are constantly evolving, it’s essential to explore other opportunities that might offer similar or even greater growth potential.
Diversification will never go out of style, and it will always be a wise move. While Nvidia is certainly enticing, we’d all do well to remember the dot com crash for a refresher on why sticking all your eggs in one basket is a perilous bet — particularly in tech.
If you’re ready to diversify and explore new opportunities in the market, it’s a good time to open a brokerage account and take control of your investment strategy.
The closest and most direct competitor to Nvidia is AMD, as both companies vie for dominance in the GPU market, with a focus on gaming, data centers and professional visualization.
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