Nvidia Leads the Charge in AI, But Intel May Be the Undervalued Gem

Semiconductor designer Nvidia (NASDAQ: NVDA) has been a standout performer in the stock market over the past few years. As a key player in the artificial intelligence (AI) boom, Nvidia’s sales and profits have surged. The stock saw a remarkable rise of 171% in 2024, and since the launch of OpenAI’s Nvidia-powered ChatGPT system in 2021, it has soared more than 720%.

The buzz around Nvidia is undeniable, with many investors expecting its growth trajectory to continue. However, some experts caution that the current stock price may already reflect years of anticipated growth. There are indications that Nvidia could be due for a price correction or may not experience the same high level of growth in the coming years.

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While Nvidia deserves attention, a potential correction does not diminish its status as a leading player in a growing AI market. Holding onto the stock may still yield positive returns over time.

However, if you’re considering tech stocks, you might want to take a closer look at Intel (NASDAQ: INTC), a chip industry giant currently valued significantly lower than its potential.

Image source: Getty Images.

Intel Faces Challenges as It Rebounds

Intel has encountered numerous challenges in recent years. There has been instability in leadership, with turnover in the CEO position, and rival Advanced Micro Devices (NASDAQ: AMD) has been capturing significant market share in critical segments. Compounding these issues, Intel has struggled to capitalize on the booming AI market.

Consequently, Intel’s stock has dropped by 71% over the last five years, trading at 1.5 times trailing sales and 20 times next-year earnings estimates. From a historical perspective, these figures look appealing, especially when compared to AMD’s and Nvidia’s inflated valuations.

The market appears to expect perfection from Nvidia while pricing Intel as a failing enterprise. Current market trends show that Intel’s value is below its book value, indicating a dramatic loss of investor confidence.

Intel’s Vision for the Future

This bleak outlook for Intel may be shortsighted. The company is undergoing significant transformations in its business approach. It’s set to invest approximately $100 billion into domestic chip manufacturing over the next five years.

This ambitious plan aims to establish Intel as a leading third-party chip manufacturer, operating most of its facilities from the U.S. This shift is crucial because the global technology industry has become heavily reliant on Taiwan for manufacturing, which may not be sustainable going forward.

Moreover, Intel’s new strategy has received attention from major clients, including Microsoft (NASDAQ: MSFT). Even Nvidia is exploring the possibility of placing chip orders with Intel to leverage its American manufacturing base and secure a supply chain less dependent on Taiwan Semiconductor (NYSE: TSM).

Thus, Intel is redefining its identity in the semiconductor landscape, and this evolving strategy could prove valuable over time.

Seize Your Opportunity with Intel

A swift turnaround for Intel may not happen in 2025 or even 2026. The shift to a foundry-focused strategy is expected to require time, compounded by current leadership changes within the company.

While the stock’s recent downturn is notable, Intel didn’t warrant such a drastic 71% decline. It’s essential to view this not just as a turnaround story but as a potential overreaction to its strategic pivot. In this context, investing in Intel’s future ambitions might be a more appealing choice than acquiring more Nvidia shares at inflated prices. You may come to the same conclusion through your research.

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*Stock Advisor returns as of January 6, 2025

Anders Bylund has positions in Intel and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft, short February 2025 $27 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.