2025 was a solid year, and valuations aren't cheap, yet there is still significant upside left in these three AI leaders.2025 is nearly over, and despite the strong year, many investors are biting their fingernails over the prospects for 2026. Will the artificial intelligence (AI) boom continue despite talks of a bubble and debt investors recently balking at funding large-scale data centers? Whom will President Donald Trump pick as the new Federal Reserve chair, and will the new nominee be independent?Short ...

Core Insights - Nvidia's stock has increased by approximately 28% since December 6, 2024, while Intel's stock has surged by 95%, indicating a successful contrarian investment strategy [3] - The current market environment suggests that Nvidia, with a market cap of $4.4 trillion, is priced for perfection, while Intel, valued at $200 billion, is seen as undervalued [13][14] Nvidia's Performance - Nvidia remains a strong company, but it is now entering a "grind" phase after a period of rapid growth, with its market cap reflecting high expectations [5] - The transition from training AI models to inference workloads may lead to increased cost sensitivity, impacting Nvidia's pricing power [9] Intel's Positioning - Intel is positioned as a key player in the geopolitical landscape, capable of establishing a resilient supply chain outside of TSMC, which is critical as chip supply becomes intertwined with national security [12][17] - Intel's 18A node technology, while not expected to outperform TSMC's N2 immediately, could still provide value if it demonstrates stability and feasibility [11][17] Market Dynamics - The increasing use of Google's Tensor Processing Units (TPUs) poses a competitive threat to Nvidia, as these chips offer significant price-performance advantages for inference tasks [10] - Major tech firms like Amazon, Microsoft, and Meta are under pressure to optimize their AI hardware expenditures, which could lead to a shift away from Nvidia's high-cost GPUs [10] Strategic Considerations - Intel's investments in new manufacturing facilities and innovative technologies like Backside Power Delivery (PowerVia) could enhance its competitive position and appeal to high-performance applications [17] - The geopolitical context, including tariffs and U.S. government support for local manufacturing, may further benefit Intel's market position [17]

Core Insights - Intel's Q3 earnings report indicates a revenue of $13.7 billion, reflecting a 3% year-over-year increase, with a diluted EPS of $0.90 and a gross margin of 38.2% [6] - The company anticipates that yields for its 18A manufacturing process will improve to industry-acceptable levels by the end of next year, with better performance and yield expected from the next-generation 14A node [1][4] - Analysts have noted that demand for Intel's CPUs is exceeding supply, a trend that may persist into 2026, leading to a raised Q4 outlook by 3% [4] Financial Performance - Revenue for Q3 was $13.7 billion, up 3% YoY, with a net income of $4.1 billion compared to a net loss of $16.6 billion in Q3 2024 [6] - The guidance for Q4 revenue is projected between $12.8 billion and $13.8 billion, with a gross margin expected at 34.5% [6] - The company’s Q4 guidance includes a gross margin target of 36.5%, but analysts suggest that a full EPS recovery requires a gross margin above 45% [9] Analyst Insights - Bank of America has lowered its pro forma EPS estimates for 2026 by 4% to $0.51, citing slow internal adoption of the 18A node and competitive pressures in the foundry market [7] - The stock is considered overvalued, trading at a 50 multiple price-to-earnings estimate for 2027, with a reiterated underperform rating and a price target of $34 [8] - Key challenges identified include gross margin pressure, tough competition in both products and foundry, and a lack of large external customer wafer orders [9]