Nvidia stock rose early Monday as the market grew more confident in the prospect of a Federal Reserve rate cut. But rival Advanced Micro Devices Inc. could offer bigger gains in artificial intelligence chips, according to analysts at Melius Research.
Nvidia shares rose 1.6% to $902.16 in early trading. Shares rose 3.5% on Friday.
Among other chipmakers, AMD shares rose 1.5% and Intel shares rose 0.6%.
Nvidia is the leading provider of chips for training AI systems, with AMD in second place. This situation is unlikely to change anytime soon, but Melius Research analyst Ben Reitzes says AMD could benefit from a shift from training to inference, the process of generating answers and results from AI models. It is said that there is a sex.
“Clear winners like Nvidia and Broadcom, but increased capital spending in big cloud [companies] This should benefit not only AMD, but also Microsoft and Meta Platform, especially for orders for inference workloads,” Reitzes wrote in a research note on Monday.
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AMD’s stock fell after its latest results, as revenue estimates from its data center graphics processing units appeared to be lower than some investors had expected. However, Reitzes insisted that any caution appears to be due to capacity constraints, which will ease in the second half of the year, rather than a lack of demand.
Reitzes rates both Nvidia and AMD stocks as “buys.” However, the $1,125 price target for NVIDIA stock suggests about 26% upside potential from current levels, and the $210 price target for AMD stock suggests 37% upside potential.
Melius analysts are among the most bullish on Wall Street for both stocks, but they seem to generally agree that AMD has the potential for further growth from current levels. Analysts’ average target price for AMD stock is $178.13, compared to $925.98 for NVIDIA stock, according to FactSet.
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On a price-to-earnings basis, the two companies are roughly equivalent. AMD stock trades at 36 times consensus earnings per share estimates for the next 12 months, while NVIDIA stock trades at 33 times consensus estimates on the same basis.
Nvidia stock is up 79% this year through Friday’s close, while AMD stock is up 2.2% over the same period. Compared to this,
S&P500
The index rose 7.6%.
Nasdaq Composite Index
over the same period.
Email Adam Clark at [email protected].