Chipmakers across the board are facing headwinds. Thanks to US-China sanctions and the controversial trade war – that now seems to be slipping towards a tech war – chipmakers of the world are facing pretty rough seas.
Amidst tech wars, intense competition, and a general slowdown in the chip market, the investment consensus should be a pretty straightforward: “I think I’ll decline.”
However, stormy weather and waning demand is not the end of the story. Chipmakers, creators of the central and graphics processing units (CPUs and GPUs) required for computing and gaming are poised to take over a new market, Artificial Intelligence.
Artificial intelligence is no longer a market of simple robotics and massive computers with unfathomable processing speeds. The chip makers of today are looking at a more sophisticated level of AI: self-driving cars, the Internet of Things, and computers with deep learning capabilities (i.e., machines that learn as they generate and process information).
The market potential here may be as limitless as the artificial intelligence applications themselves. Nvidia and Intel [NASDAQ: INTC] are at the forefront and in control of the majority stake of this emerging market.
Is Nvidia Stock A Buy?
There was a time in the not-so-distant past that Nvidia [NASDAQ: NVDA] seemed to be the darling of tech stocks.
In fact, Nvidia pioneered the graphics processing units needed to meet the intense visual video demands of modern gaming. Nvidia supplies CPU’s and GPU’s for cryptocurrency mining, video gaming, and super-computer processing as well as the CPU needs for retail; Amazon [NASDAQ: AMZN] is among its most notable customers.
The problem isn’t in the products. The problem is the waning demand for all these products.
While AI and IoT are on the cusp of an explosive growth cycle, cryptocurrency mining, PC and gaming markets are experiencing a downturn that is set to impact the chip market in their short-term earnings projections.
In fact, as a supplier for Samsung, Nvidia [NASDAQ: NVDA] has already begun to feel the sting of shrinking demand.
Samsung’s announcement of downward revised earnings expectations and a warning of a reduction in quarterly profit sent Nvidia’s stock into negative territory earlier in July.
As a company, Nvidia [NASDAQ: NVDA] has a bright future and stands at the forefront of Artificial Intelligence and the Internet of Things.
The big question for investors: How will Nvidia [NASDAQ: NVDA] fare amidst the storm of increasing competition, shrinking markets, and lowered profit margins?
A temporary dip in price could be just the opportunity investors are looking for, although they may find it takes some patience for the anticipated artificial-intelligence-driven products to impact the bottom line.
Should You Invest in Intel Stock?
Intel’s domination of the CPU market for personal computing has been a multi-decade long story, but even the giant of core processors is beginning to feel the strain.
Additional competitors, slowing demand, and internal capacity issues have forced Intel to concede that the current environment is going to impact profits.
5G, in particular, could be the catalyst Intel [NASDAQ: INTC] needs to see a return to positive growth and increased prominence in the chip market.
Intel [NASDAQ: INTC] has wisely diversified, developing 5G and AI products that are needed to bring mass adoption of things like driverless cars, and 5G personal computers.
The 5G rollout is well underway in multiple countries, and Intel’s work with Mobileye in the autonomous car industry is moving them ever closer to the actual implementation of the technology.
The move should provide Intel with the opportunity to realize value from a vast portfolio of technology, patents, and intellectual property the company has spent years developing, while also allowing for greater focus on the emerging tech of tomorrow.
What Intel [NASDAQ: INTC] needs now is to bridge the gap between a slowing chip market built on already existing products, and the rising tide of demand for newer, faster, technology. Intel is a solid company, with a healthy balance sheet, and technology investments that are sure to bring a positive return, it’s merely a question of when.
Intel vs Nvidia Stock: The Bottom Line
No company is the rising star forever. Intel [NASDAQ: INTC] and Nvidia [NASDAQ: NVDA] are both examples of companies that rose to prominence by anticipating and investing in new technology of years past. The companies are also examples of the ever-changing, fast-paced world of technology: What is new today can be obsolete tomorrow.
Their investments in the emerging technologies of artificial intelligence, 5G, the Internet of Things, and data processing exhibit the same vision that propelled them to the top in past decades.
The bottom line for both of these heavy hitters can be summed up on one word: catalyst. Both companies are poised for growth; both companies have invested and diversified in the next-generational needs of computing. The demand for faster, better, and smarter computers, cars, and a whole host of personal devices is coming. Moreover, it’s coming soon.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.