Nvidia is down 21% so far this month, while AMD and Broadcom have gained, and CEO Jensen Huang has announced he is stepping down. Motley Fool analyst Keithen Drury argues Nvidia will likely be fine as a company and sees AMD as the priciest of the three.
Nvidia's stock was a bit weak heading into November amid a marketwide AI sell-off, and in the days since news broke that Huang had an affair with an alleged Chinese spy, the stock has taken a beating, according to The Motley Fool. The weakness continued after Huang announced on Thursday that he was stepping down as CEO. CFO Colette Kress will lead the company on an interim basis while the board searches for a successor.
Meanwhile, AMD has risen by around 4% this month, and Broadcom is up about 6%.
Nvidia leads in data center revenue
All three companies compete in data center computing. Nvidia and AMD design GPUs, which handle a wide range of computationally heavy workloads but cost more to manufacture, buy and operate than chips built for narrow AI workloads. Broadcom's custom AI chips fill that narrower role, and data center operators are finding them popular.
Nvidia has by far the largest data center segment. In its most recently reported quarter, its data center revenue rose 117% year over year to $89 billion. Broadcom's AI semiconductor division posted quarterly revenue of $16.7 billion, growing 221% year over year. AMD's data center revenue grew 97% year over year to $8.5 billion.
Valuations split the three stocks
Drury argues that companies often go through CEO transitions without being derailed, even without a clear succession plan. He says he is not worried about Nvidia.
He prefers to value the stocks against next year's earnings projections. Nvidia trades at 10.6 times next year's earnings, AMD at 29 times and Broadcom at 17 times forward earnings.
Drury considers AMD's valuation too high and says that could sap its future returns. He names Broadcom as the AI chipmaker with the highest upside and lowest risk.
Source: The Motley Fool
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