Why Long-Term Investors Should Prefer NVIDIA Over Intel

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NVIDIA and Intel are moving aggressively into self-driving cars, but NVIDIA’s growth opportunities extend well beyond this coming growth market.

There may not be a better example of the changing of the guard taking place in tech than what’s happening with INTC and NVDA.

The old guard – Intel -remains the largest and most profitable semiconductor company in the world, though Qualcomm has vied for that crown once or twice in the past decade. NVIDIA is the ascendant challenger, though by no means a new company itself. And though NVIDIA’s $63 billion market cap remains much smaller than Intel’s $167 billion valuation, their more recent trading histories speak volumes about the trajectories of each business.

mportantly, Intel’s planned $15.3 billion buyout of self-driving-car chip designer Mobileye (NYSE:MBLY) changes the outlook for the stodgy chipmaker to a meaningful degree. Even taking that into account, though, NVIDIA still remains a better stock than Intel to own today for long-term tech investors.

NVIDIA is just getting started
Thanks to its multiple significant growth drivers, NVIDIA appears poised to grow at above-average rates for many years to come. Though its gaming segment contributes the majority of its revenue, NVIDIA’s true growth drivers lie in two segments: data center and auto.

Its data center platform houses NVIDIA’s artificial intelligence (AI) computing chips, which have emerged as the go-to standard among many of the world’s foremost developers of AI software — Alphabet, Baidu, Facebook, and more. Revenue from the data center segment more than doubled last year, and the market is in many regards just taking shape. By 2020, researcher IDC estimates that AI software will have surged to reach $47 billion in sales, and NVIDIA seems like a fairly safe bet to power the majority of this software.

In its automotive segment, the company continues to press forward at an impressive clip. Revenue in the segment increased by 52% last year, which, again, low-balls its eventual growth potential. The company has partnered with many of the foremost pioneers in the space — including Tesla, Baidu, Honda, BMW, and many more — which should help pave the way for revenue growth to accelerate as autonomous vehicles become increasingly popular in the 2020s.

Moreover, NVIDIA continues to improve on its current technologies and forge new partnerships, which should help the chipmaker maximize its market share and profits in future years. In the past several weeks, NVIDIA announced partnerships with Bosch and PACCAR, each of which touch on previously unexploited areas of the automotive industry for NVIDIA. As such, its multiple mass-market growth drivers make NVIDIA a better long-term growth stock than Intel, despite savvy recent maneuvers from the world’s largest chipmaker.

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