Nvidia Stock Might Not Last at the Top as AI Chip Market Expands

People didn't have high expectations of Nvidia's stock considering how bad the market has been. However, its recent financial report shows another blockbuster quarter, with the AI chip maker getting a 62% increase in revenue year-on-year to reach $57 billion (£43 billion).

Nvidia's earnings were mostly from its data-centre division which stands at the core of its AI business and it grew to $51 billion (£38 billion). In total, the recent movements gave Nvidia fourth quarter forecasts as high as $65 billion (£49 billion).

Of course, the recent news isn't just good for Nvidia. It's good for the stockholders as well. The company has been performing well ever since the AI boom. Whenever it seems like it has boomed, Nvidia sets new highs again.

However, the AI market is becoming more and more competitive as the years go on. Will Nvidia continue to stay at the top of the AI chip market? Or are new contenders coming to take the top spot soon?

Contenders Close the Gap on Nvidia

After the recent financial report, Nvidia's stock went to $1.30 (£0.98) per share, a massive rise compared to last year's $.78 (£0.59) per share.

Despite this strong performance, analysts note that the field Nvidia is on is shifting quickly. As of this writing, the company is sitting on over $300 billion (£227 billion) in outstanding orders for its Blackwell and next-generation Rubin chips. This massive demand is drawing more movement from Nvidia's key challengers.

One of the top names going for Nvidia is AMD. The company has forecasting 60% annual growth in its data-centre business within the next 3 to 5 years. At its current pace, the company is on its way to reporting a $15 billion (£11.3 billion) in data-centre revenue this year and if momentum holds, that could push beyond $60 billion (£45 billion) by 2028.

Even more promising is the fact that AMD has made deals with Oracle and OpenAI to narrow their chip's performance gap with Nvidia's and it might not be long before they catch up.

Another company that's closing in on Nvidia is Broadcom. The company's AI-related revenue is expected to hit $20 billion (£15 billion) this fiscal year which is an impressive 64% from last year.

Sitting on Long-Term Advantages

There are talks that Broadcom is closing in on a landmark contract with OpenAI that could rake in $100 billion (£75 billion) in sales by 2029. Broadcom also ended the last quarter with over $110 billion (£83 billion) backlog so they have a strong future demand, similar to Nvidia.

Nonetheless, concerns about overheating valuations persist, with some analysts drawing comparisons to the late-1990s dot-com bubble. There has also been scrutiny of circular investments within the AI ecosystem, including Nvidia's own $100 billion (£75.7 billion) commitment to OpenAI.

For now, Nvidia is sitting on long-term advantages. With global investment in AI infrastructure showing no sign of slowing. AI is estimated to generate around $20 trillion (£15.1 trillion) in global value by 2023. As for Nvidia, its expected data-center spending is expected to reach $3 trillion to $4 trillion (£2 trillion to £3 trillion) by 2030.

Nvidia's stock seems like a safe bet for investors till now. But analysts note that the AI market is still young and volatile. It's always best to take precaution when investing huge funds in companies like Nvidia as there could be another contender on the rise without warning.