AI Stock Dip Presents Buying Opportunity: Nvidia or AMD?
Artificial intelligence (AI) stocks experienced a significant surge in investor interest last year, contributing to the Nasdaq’s double-digit gains. While this momentum continued into early 2025, these high-performing stocks have recently faced headwinds.
Concerns about the economy and potential impacts from tariffs, particularly those proposed by President Donald Trump on imports from Canada, China, and Mexico, have weighed on the market—especially impacting high-growth companies. This has pushed the Nasdaq Composite (^IXIC -0.33%) into correction territory, with the index dropping over 10% from its December peak.
However, for astute investors, market downturns can create opportunities. The recent declines in major AI players like Nvidia and Advanced Micro Devices (AMD) indicate potential bargains, signaling an excellent buying opportunity.
It’s important to understand that current economic uncertainties, though a concern, don’t alter the long-term positive outlook for AI. The current $200 billion AI market is projected to surpass $1 trillion by the end of the decade, which could drive explosive growth for specific AI companies.
Two companies with high potential for future growth include Nvidia (NVDA 0.76%) and Advanced Micro Devices (AMD 0.93%). Both AI chip giants have seen their valuations decrease, placing them in what some consider bargain territory.
So, which company presents the better investment opportunity during this Nasdaq correction?
The Case for Nvidia
Nvidia dominates the AI chip market, holding an 80% share. Their graphics processing units (GPUs) are premium-priced, but they also deliver high performance, attracting major tech companies. The demand for the Blackwell architecture, Nvidia’s latest launch, exceeded supply, demonstrating its popularity.
This has fueled solid growth for Nvidia throughout the AI boom. The company has consistently reported double- or triple-digit revenue growth quarter after quarter, culminating in record revenue levels. In the most recent quarter, revenue jumped 78% to a record $39 billion, and full-year revenue soared 114% to a record $130 billion.
While the high price of Nvidia’s GPUs might eventually slow growth, Nvidia aims to maintain its competitive edge through ongoing innovation, promising annual GPU updates. This could make it challenging for competitors to significantly increase their market share.
Considering this, Nvidia, trading at 25x forward earnings estimates – down from 50x earlier this year – presents itself as an attractive long-term investment opportunity.
The Case for AMD
AMD is the second-largest player in the AI chip market. Their market share is around 10%, and their AI growth hasn’t matched Nvidia’s explosive growth. The company focuses on GPUs for AI and offers good performance at a reasonable price.
By offering cost-effective options, AMD could attract more customers as the demand for AI chips grows. Even major tech companies like Microsoft, have also become AMD customers; Microsoft uses AMD’s MI300X GPUs for several GPT-4-based Copilot services.
AMD plans to maintain its competitiveness by also releasing innovations annually. While Nvidia is likely to maintain its lead, AMD can still achieve significant growth with this strategy. AMD called the previous year as “transformative” for its progress in the AI market. In the fourth quarter, data center revenue increased 69% to a record $3.9 billion, and for the year, revenue soared 94% to a record $12.6 billion.
Similar to Nvidia, AMD’s valuation has declined recently, offering an interesting buying opportunity, trading at 21x forward earnings estimates, down from over 27x in January.
Which Stock is the Better Buy?
Both companies present solid additions to an AI portfolio. If an investor could only select one to buy during this Nasdaq correction, Nvidia would be the better choice. The company’s strong position and focus on innovation indicate sustained leadership for the long run. This should result in continued earnings growth. Considering Nvidia’s recent valuation drop makes the present a good time to invest in this AI powerhouse, supporting its potential for future success.
