This Artificial Intelligence (AI) Stock Will Outperform Nvidia Through 2028

Core Viewpoint - Nvidia has significantly outperformed the market over the past three years, largely due to the rise of generative AI, but Adobe is positioned to potentially outperform Nvidia in the coming years based on current valuations and competitive dynamics [1][2]. Nvidia - Nvidia's stock price has increased more than tenfold since the launch of ChatGPT, making it the most valuable company globally with a market cap exceeding $4 trillion [2]. - The company reported a 73% year-over-year increase in data center revenue for fiscal Q1 2026, leading to a 33% increase in earnings per share (EPS), although this included a $4.5 billion writedown on inventory [5]. - The lifting of the U.S. ban on sales to China allows Nvidia to reverse the writedown on H20 GPUs, which now have value again [5]. - Competitors like AMD are making strides with their own AI accelerator chips, which could impact Nvidia's market share [6]. - Major customers of Nvidia are developing custom AI accelerators, which may reduce demand for Nvidia's general-purpose GPUs in the long run [7]. - Nvidia's forward P/E ratio of 40 raises concerns about its valuation, suggesting that expectations for continued high growth may be overestimated [8]. Adobe - Adobe's Creative Cloud suite is the industry standard for creative professionals, and while generative AI poses a threat, Adobe is investing in its own AI model, Firefly, to enhance its offerings [10]. - The market currently views the risks of AI for Adobe as outweighing the benefits, leading to a stock decline of over 40% from its all-time high [11]. - Adobe's strong customer base and high switching costs help retain users, as familiarity with its software is crucial for professionals in the industry [12]. - The integration of generative AI tools is expected to boost revenue per user and improve retention rates, with a reported 30% year-over-year increase in first-time subscribers [13]. - Management anticipates that revenue from AI products will more than double this year, contributing to a 12% growth in annual recurring revenue last quarter [14]. - Adobe's share buyback strategy, supported by steady free cash flow from subscription revenues, is expected to lead to consistent double-digit EPS growth over the next three years [15].