No company has benefited more from the AI boom than Nvidia (NASDAQ: NVDA). Training massive models of large languages and their execution requires enormous computing capacity. Nvidia’s data center GPUs are the gold standard in the AI industry and are being snapped up by cloud giants and AI startups alike.
Nvidia’s revenue more than tripled last quarter thanks to incredible demand for its AI-driven GPUs, while adjusted earnings per share jumped nearly sixfold. Nvidia’s market capitalization has soared to over $2 trillion, making it one of the most valuable companies in the world.
Why Nvidia stock might not be the best AI bet
Although Nvidia is riding high right now, the competition is almost guaranteed to eat into the company’s AI market share. Advanced Micro Devices is now fighting back with its own high-powered AI chips, and big tech and cloud companies are increasingly designing custom AI chips optimized for their data centers.
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Amazon developed multiple AI chips: Inferentia for AI inference and Trainium for AI training.
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AlphabetGoogle is on the fifth generation of its Tensor Processor, or TPU, with the company releasing a version optimized for large AI models late last year.
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Meta It is reportedly working on a custom AI chip to help power its massive AI ambitions.
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Microsoft introduced its custom Maia 100 AI chip for its Azure cloud platform last year. It will initially be used to power the company’s AI services, including Copilot and OpenAI services running on Azure.
While these mega-companies still buy a lot of Nvidia GPUs, the options for training and running AI models are expanding. Nvidia’s complete dominance of the AI chip market is almost certain to disappear over time.
Someone has to manufacture and package all those AI chips
Designing an AI chip is something any big tech company with a big budget is capable of doing. Manufacturing those chips is another story. Today, there is only one viable option to manufacture AI chips using the most advanced process. TSMC is the leader in the foundry market and has a significant technological lead over its competitors.
This situation is expected to change in 2025 as Intel (NASDAQ: INTC) seriously enters the foundry market. The chip giant is following through on its plan to launch five new process nodes in four years, with the latest node expected to overtake TSMC technologically. The Intel 18A process should be ready for mass production next year, and Intel has already secured some important customers.
Intel has secured orders worth $15 billion for its foundry business so far, covering not only the Intel 18A but other nodes as well as advanced packaging services. Nvidia is reportedly planning to use Intel for some of its advanced packaging needs, although this rumor has not been confirmed. A deal has been confirmed with Microsoft to use Intel 18A for an undisclosed future chip, representing a huge win for Intel’s fledgling foundry business.
In addition to the Intel 18A, Intel has two additional processes on its roadmap designed to solidify its manufacturing leadership. Intel 14A is due in 2026 and Intel 10A will follow in 2027. Volume production of both processes will take time to ramp up after their introduction.
$230+ billion opportunity
The foundry market is expected to more than double by 2032 to exceed $230 billion. Intel’s market share is rounded down to zero today, but if it can regain its manufacturing advantage and increase the capacity of its flagship nodes, the company could quickly increase that market share over the next decade.
Today, Intel is valued at less than $200 billion, with shares still well off their pandemic-era highs. While Intel’s core PC and server processor businesses will remain key parts of the company, the foundry business has by far the best long-term growth potential.
The important thing is that Intel’s foundry can succeed regardless of how the semiconductor and artificial intelligence industries develop. Do GPUs remain the dominant method for training and driving AI models? Intel could potentially produce them. Are Custom AI Chips Proliferating? Intel can make those too. What if the demand for AI chips does not match the predictions? Intel can make other types of chips designed for the data center, smartphones, computers and other devices.
Although Nvidia is the darling of AI today, it faces pressure from looming competition. This attack is good news for the foundry industry, and it’s especially good news for Intel as it aims to become the world’s second largest foundry by 2030.
Should you invest $1,000 in Intel right now?
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Suzanne Frey, CEO of Alphabet, is a member of The Motley Fool’s board of directors. Randy Zuckerberg, former Facebook CMO and spokesperson and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s board of directors. Timothy Green holds positions in Intel. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 Intel calls, long January 2025 $45 Intel calls, long January 2026 $395 Microsoft calls, short January 2026 $405 Microsoft calls and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
1 Best AI Stocks to Buy Before 2025 (Hint: It’s Not Nvidia) was originally published by The Motley Fool
