Nvidia Reports Earnings This Month, and I'm Not Buying Shares. 1 AI Stock to Buy Now Instead.
The Motley Fool • • business
Key Points:
- Nvidia is set to report fiscal Q1 2027 results with revenue guidance around $78 billion, implying 75% year-over-year growth, but its stock trades at a high price-to-earnings ratio of about 46, reflecting expectations of sustained dominance.
- Despite Nvidia's strong recent growth, key customers like Alphabet, OpenAI, and Meta are developing or commissioning their own AI chips through partners like Broadcom, which could reduce Nvidia's future pricing power and demand.
- Amazon's chip business, including Trainium and Graviton, has reached a $20 billion annual revenue run rate and is growing rapidly, with potential to hit $50 billion if treated as a standalone business, supported by strong commitments from major AI model developers.
- Amazon offers a more diversified business model combining cloud computing and custom chips, trading at a lower valuation of about 32 times earnings, which may present a more attractive long-term investment opportunity compared to Nvidia.
- While Amazon faces risks from high capital expenditures, its integrated approach and faster-growing chip portfolio position it as a compelling alternative to Nvidia in the AI chip market.