Nvidia (NASDAQ: NVDA) has emerged as one of the hottest tech stocks in the past decade, riding the wave of the expanding artificial intelligence (AI) market. The chipmaker, known for its gaming GPUs, made a strategic move into the data center space with more powerful GPUs tailored for AI tasks. This first-mover advantage propelled Nvidia’s growth, with revenue increasing at a compound annual growth rate (CAGR) of 31% from fiscal 2014 to fiscal 2024. The stock price also soared an impressive 16,570% over the past 10 years, showcasing the company’s success in capitalizing on the AI market expansion.
Analysts project Nvidia’s revenue to continue growing at a rapid pace, with a CAGR of 35% expected from fiscal 2024 to fiscal 2027. This forecast solidifies Nvidia’s position as a prime player in the AI market, offering investors a promising opportunity to benefit from the industry’s continued growth.
However, not all companies focusing on the AI market are guaranteed to enjoy the same success as Nvidia. Two weaker AI stocks that may struggle to sustain their growth in the long term are C3.ai (NYSE: AI) and Mobileye (NASDAQ: MBLY).
C3.ai develops AI algorithms that can be integrated into existing software to automate and streamline tasks. The company faces stiff competition and relies heavily on a joint venture with energy giant Baker Hughes for around 30% of its revenue. With the joint venture set to expire in fiscal 2025, C3.ai’s future prospects appear uncertain. The company’s revenue growth slowed to just 6% in fiscal 2023, well below its original targets. Moreover, its shift to usage-based fees from subscription-based plans has dampened investor confidence in its growth potential.
In the case of Mobileye, the company specializes in advanced driver assistance systems (ADAS) that leverage its EyeQ computer vision chips for semi-autonomous driving features. Despite being a key player in the connected and driverless vehicle markets, Mobileye is facing a significant cyclical slowdown. The company expects a revenue decline of 6% to 12% in 2024, reflecting excess chip inventory and disruptions in the supply chain. While Mobileye is likely to recover from this downturn in the coming years, its stock currently appears overvalued at 62 times forward earnings.
Investors looking to capitalize on the AI market’s growth may find Nvidia to be a more attractive investment option compared to C3.ai and Mobileye. Nvidia’s strong track record, robust growth projections, and solid market position make it a compelling choice for those seeking exposure to the AI industry’s expansion. As the AI market continues to evolve and expand, Nvidia remains well-positioned to capitalize on these trends and deliver sustained growth for investors.
