Key Points Nvidia will dominate the AI chip market for the foreseeable future. Microsoft’s Copilot and Azure platforms are expanding. Both stocks still look reasonably valued relative to their growth potential. 10 stocks we like better than Nvidia › The artificial intelligence (AI) market expanded rapidly in recent years as sophisticated AI chatbots locked in hundreds of millions of users. That secular shift is driving more companies to upgrade their AI infrastructure and integrate more AI applic ...

Core Viewpoint - Nvidia is a key player in the rapidly growing AI market, with significant growth potential despite its already impressive performance [1][3]. Company Performance - Nvidia's stock price has increased approximately 1,230% over the past five years [2]. - From fiscal 2020 to fiscal 2025, Nvidia's annual revenue grew at a CAGR of 64%, rising from $10.9 billion to $130.5 billion [2]. - The adjusted gross margin expanded from 62.5% to 75.5%, while adjusted net income grew at a CAGR of 83%, from $3.6 billion to $74.3 billion [2]. Market Position - Nvidia holds over 90% of the discrete GPU market and is recognized for its superior AI GPUs [5]. - The company benefits from its proprietary CUDA programming platform, which optimizes AI applications for its GPUs [5]. - Strategic partnerships with major customers like Amazon Web Services, Microsoft Azure, and Google Cloud enhance Nvidia's competitive edge [6]. Future Growth Expectations - Analysts project Nvidia's revenue and earnings per share (EPS) to grow at a CAGR of 36% from fiscal 2025 to fiscal 2028 [7]. - At a stock price of $183, Nvidia is considered reasonably valued at 30 times next year's earnings [7]. Competitive Landscape - Nvidia faces competition from AMD, particularly with AMD's cheaper Instinct MI300X GPUs, but Nvidia's Blackwell GPUs are still superior for large-scale AI workloads [6]. - Some of Nvidia's key customers are diversifying their AI infrastructure by forming new deals with AMD, indicating a potential shift in market dynamics [10]. Regulatory and Market Risks - U.S. regulations have restricted Nvidia from shipping certain GPUs to China, which accounted for approximately 17% and 13% of its revenue in fiscal 2024 and fiscal 2025, respectively [9]. - The AI market's growth may be hindered by tighter government regulations and potential economic slowdowns, which could impact GPU purchases by major AI companies [11][12].