Unleashing the AI Potential: Amazon vs Nvidia
When it comes to the realm of AI, the spotlight often shines on the “Magnificent Seven” stocks. In the past year and a half, major tech players have been making waves with billion-dollar investments in artificial intelligence ventures.
Amidst the frontrunners in the Magnificent Seven are powerhouse companies like Nvidia and Amazon (NASDAQ: AMZN). While Nvidia currently holds a firm grip across various AI verticals, it’s crucial not to overlook the potential of its competitors.
The Reign of Nvidia in AI
Nvidia has positioned itself as a leader in AI chip design, specifically with its graphics processing units (GPUs). These chips play a pivotal role in activities such as training large language models, machine learning, and autonomous driving applications.
Moreover, Nvidia’s GPUs find utility beyond tech boundaries, making their mark in sectors like healthcare. Notably, leading pharmaceutical companies like Novo Nordisk have adopted Nvidia’s GPUs for their operations.
This widespread adoption has culminated in Nvidia commanding an impressive 80% share of the AI chip market. Yet, the AI landscape is still in its infancy, leaving room for potential contenders to make their mark.
Amazon’s Strategic Maneuvers
While Nvidia has long been synonymous with AI dominance, Amazon is silently gearing up for a significant push in the realm of artificial intelligence.
One notable development in this space is Amazon’s investment in AI unicorn, Anthropic, to the tune of $4 billion. By leveraging its own Trainium and Inferentia chips, as well as AWS as its primary cloud provider, Anthropic is poised to make waves in the AI landscape.
Furthermore, Amazon’s Trainium and Inferentia chips are gaining traction among players like Hugging Face. With a recent collaboration between Hugging Face and AWS to deploy workloads on Inferentia, Amazon is gradually reducing its reliance on Nvidia products.
The Stock Market Perspective
Currently, Amazon’s stock is trading close to all-time highs, leading some to believe it may be overpriced. However, when analyzing Amazon’s earnings growth, a different narrative emerges.
Amazon’s earnings per share (EPS) have increased significantly over the past year, surpassing the rise in share price. This has resulted in a decline in Amazon’s price-to-earnings (P/E) multiple, making it technically cheaper than it was a year ago.
As Amazon continues to make strategic investments in AI, it positions itself as a strong contender in the space. While Nvidia remains a prominent player in the short term, Amazon’s calculated moves could pave the way for long-term dominance.
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