Nvidia (NASDAQ:NVDA) is the 800-pound gorilla of artificial intelligence (AI). Demand for its chips is through the roof. Its shares have risen 239% over the past year and are up around 60% so far in 2024.
But Nvidia isn’t the only AI company popular with investors, and there’s another company that has particularly resonated with those who sent voters to work on Capitol Hill. Instead, members of Congress are buying shares in Nvidia’s main rival.
Out with Nvidia, in with AMD
Nvidia was among the top 10 stocks most sold by lawmakers in 2023. The trend continued this year, with sales transactions outnumbering purchase transactions by more than 2 to 1.
It’s a completely different story with modern micro devices (NASDAQ:AMD), although. According to Capitol Trades, there have been 11 reported purchases of AMD stock by members of Congress year to date versus just three sales transactions.
The purchase was made on a non-partisan basis. Democratic Rep. Josh Gottheimer of New Jersey and Republican Rep. Michael McCaul of Texas each bought AMD shares multiple times in 2024.
AMD’s calling
Members of Congress must disclose all the trades they make, but they are not required to disclose why they buy and sell certain stocks. However, it’s not too hard to figure out why some lawmakers find AMD attractive.
AMD has so far lagged significantly behind Nvidia in the AI chip market. However, the company is hoping to take some market share away from its larger rival – and it could be successful in that effort.
In December, AMD introduced its MI300X AI accelerator and its Instinct MI300A accelerated processing unit. The company claimed the MI300X chip can hold its own against Nvidia’s H100 GPU when training large language models. And AMD claimed its new chip was superior to the H100 GPU at AI inference (the process by which AI models draw conclusions from data).
Additionally, AMD launched its Ryzen line of AI chips for desktops and laptops earlier this month. The new chips were touted as “the most advanced x86 processors for AI PCs.” PC manufacturers including P.S And Lenovo are expected to introduce products with AMD’s new chips this quarter.
Importantly, AMD doesn’t need to beat Nvidia in the AI chip market to be a big winner. The demand for AI chips is likely to be so great in the coming years that a company playing second fiddle in this niche will still make nice music for investors.
Is AMD a better AI stock than Nvidia?
Members of Congress seem to prefer AMD over Nvidia these days. But are they right when they think that way? Is AMD a better AI stock than Nvidia?
Both stocks are expensive based on a popular valuation metric: AMD trades at a forward price-to-earnings ratio of 45.7, while Nvidia’s forward earnings multiple is around 34.3. However, these metrics are only based on profit estimates for next year.
There’s a good case to be made that AMD could grow faster than Nvidia over the next five years. Tech companies, especially the large ones, don’t want to be too dependent on one source for chips and have backed Nvidia when it comes to AI silicon. AMD could be an attractive alternative if it can offer comparable performance at a lower cost.
Nvidia could out-innovate AMD and maintain its dominant market share lead. For now, however, I agree with politicians on Capitol Hill who believe AMD is a better stock to buy.
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, HP and Nvidia. The Motley Fool has a disclosure policy.
Forget Nvidia: Members of Congress Snap Up Stock in Its Chief Rival Instead was originally published by The Motley Fool