Prediction: This Artificial Intelligence (AI) Semiconductor Stock Will Outperform Nvidia Over the Next 3 Years
When it comes to artificial intelligence (AI) semiconductor stocks, Nvidia (NASDAQ: NVDA) is the gold standard, and there is still a lot to like about the stock. It remains the dominant chip company for AI model training, and that is unlikely to change. Most early foundational AI code was written using its CUDA software platform and optimized for its graphics processing units (GPUs), creating a wide moat in this arena.
Meanwhile, Nvidia hasn’t rested on its laurels. The company is a huge player in data center networking, which has formed the base for it to become a complete AI infrastructure player offering end-to-end rack-scale solutions designed for specific AI tasks. The company also created its own custom Arm-based central processing units (CPUs), which will serve it well as the rise of agentic AI drives servers focused on AI agents to contain more CPUs.
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Nvidia has also positioned itself well for the inference market through its “acquisition” of Groq and its language processing units (LPUs). LPUs contain a small amount of SRAM (static random-access memory) and are strung together to help reduce latency and speed up inference speeds. For systems designed for inference, Nvidia will combine its GPUs, which will handle the compute-heavy pre-fill phase of processing a prompt, with LPUs, which will provide low latency for the decode phase of generating a response.
Nvidia continues to produce incredible growth, with its fiscal first-quarter revenue soaring 85% to $81.6 billion while its adjusted EPS surged 140% to $1.87. Despite that, the stock is attractively valued, trading at a forward P/E of about 24.5 times fiscal 2027 (ending January 2027) analyst estimates. Given that, I think the stock still looks like a buy. However, given its size and the law of large numbers, I predict another AI semiconductor stock, Advanced Micro Devices (NASDAQ: AMD) can outperform it over the next three years.
AMD: Ready to take on Nvidia in inference
While Nvidia controls the market for large language model (LLM) training, AMD is set to be a serious competitor when it comes to inference. Importantly, this is the faster-growing market and also expected to become the much larger one. According to projections from Bloomberg Intelligence, the inference market is projected to grow at a 32% compound annual growth rate through 2032 and become nearly double the size of the AI model training market, hitting annual spending of $1.3 billion.
