This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

In the hot field of artificial intelligence (AI), Nvidia (NASDAQ: NVDA) is arguably the king of the mountain. Its stellar AI-driven sales growth has been holding Wall Street's attention for several years now, but its blockbuster deals in 2025 are once again redefining its role in the AI ecosystem.

So it's no surprise Nvidia shares were up 40% this year through the week ending Nov. 7. The company broke a market cap record by being the first to surpass $4 trillion in July, then hit another big milestone a few months later by being the first to exceed $5 trillion.

Nvidia is an extraordinary company navigating extraordinary times, given the impact of AI across industries. But does it make sense to buy shares before it announces its fiscal third-quarter results on Nov. 19?  

Better valuation than its peers

A key factor to consider when weighing whether to invest in Nvidia is its valuation. This can be assessed by comparing various metrics to competitors in the semiconductor space, such as AMD and Broadcom.

For example, let's consider their price-to-earnings (P/E) ratios, which reflect how much investors are paying for a dollar's worth of each company's earnings over the trailing 12 months. 

Data by YCharts.

Nvidia has the lowest P/E ratio of the trio, indicating it's the best value among peers by that measure. In fact, Nvidia's earnings multiple is a bit lower than where it was a year ago, despite game-changing announcements since then, such as its deal to invest $100 billion in ChatGPT creator OpenAI.

Even so, a P/E ratio over 50 isn't cheap. But given where Nvidia's business is going, perhaps that valuation is warranted.

The company built its reputation on advanced semiconductor chips called graphics processing units (GPUs). These were first used for video game systems, but then, other uses for their parallel processing power were found that expanded the market for them. And with the advent of AI, the future of GPUs looks brighter than ever.

Nvidia's AI revolution

Nvidia CEO Jensen Huang has predicted that AI will usher in a new industrial revolution supported by "AI factories" -- massive data centers built to handle AI workloads. His prediction is already coming to pass.

For example, the U.K. government plans to increase that country's sovereign computing capacity by a factor of 20 in just the next five years. To accomplish this, it will purchase as many as 120,000 Nvidia GPUs.

Yet that pales in comparison to OpenAI's commitment to buy millions of Nvidia AI chips in the coming years. And even that may be a drop in the bucket compared to the overall market for AI accelerators.

"AI needs specialized chips to run on, and trillions [of dollars] worth of processing chips will be up for replacement through this decade," Global X research analyst Tejas Dessai wrote in a recent research note back in August 2023. Based on what has happened since, that view has been validated.

The growth ahead for Nvidia

The transition to specialized AI chips suggests Nvidia's GPU sales to date are still in the early days, and that success has already benefited shareholders. In the brief time since AI took off with the launch of ChatGPT toward the end of 2022, Nvidia's earnings per share (EPS) have been on a rocket ship.

Data by YCharts.

Moreover, outsized demand for Nvidia's GPUs is just one piece of the pie. The company went from its start providing enhanced graphics for video games to powering AI in the cloud. Now, it will deliver AI to mobile networks.

In October, Nvidia announced a deal to invest $1 billion in Nokia as they collaborate to launch the next generation of mobile telecommunications, called 6G, which will be capable of supporting AI-native wireless systems.

Nvidia also announced a $5 billion investment in Intel in September as part of a new partnership. Under the collaboration, Nvidia will make use of Intel's chip manufacturing capabilities. Nvidia has always been an entirely fabless chipmaker, outsourcing the production of its offerings. The deal also adds Intel's strengths in the PC chip arena to Nvidia's product suite.

Nvidia's dealmaking in recent months shows how it is extending its reach across the computing ecosystem. Its current P/E ratio may seem on the high side, but given its expansive and growing influence across the tech spectrum, as well as its rising earnings per share, Nvidia's shareholders could keep enjoying gains in the coming years.

That's why Nvidia remains a stock to invest in. And with its shares now down by around 7% from the 52-week high of $212.19 they reached on Oct. 29, buying them before the company announces its fiscal Q3 results on Nov. 19 may be a good move.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Robert Izquierdo has positions in Advanced Micro Devices, Broadcom, Intel, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices, Intel, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Broadcom and has recommended the following options: short November 2025 $21 puts on Intel. The Motley Fool Australia has recommended Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Electric vehicle (EV) manufacturer Tesla (NASDAQ: TSLA) achieved fame and fortune after its Model S car came out in 2012. The automobile not only boosted the company's ascent, but the entire EV market as well.

The Model S showed what was possible with an electric car. From the ability to travel long distances to a self-driving mode, the vehicle broke the mold in terms of the public's perception of an EV. I thought it was a game-changer at the time, and that's why I bought the car, as well as Tesla stock.

Now, the company is racing to repeat its Model S success. This time, it's a different type of auto, as in the automated kind. And while artificial intelligence is part of the equation, the next groundbreaking achievement isn't just about AI. It's what the company calls "sustainable abundance." 

What Tesla means by "sustainable abundance"

Tesla periodically publishes a master plan describing long-term goals. In the latest version, the company outlined its future vision, stating, "This next chapter in Tesla's story will help create a world we've only just begun to imagine and will do so at a scale that we have yet to see."

Tesla predicts a future where technology is used sustainably to create boundless prosperity for all, a concept it describes as "sustainable abundance." The idyllic aspiration may sound appealing, but how can it be achieved in practical terms?

As a step toward its ambition, the company stated, "We are building the products and services that bring AI into the physical world." One example is its robotaxi service, which Tesla launched in June as a pilot program in Austin.

This program uses a modified version of its Model Y vehicles to start. Over the long run, Tesla intends to construct an AI-driven car with no steering wheel called the Cybercab.

The company plans to produce a fleet of Cybercabs in 2026 using its innovative "unboxed" manufacturing strategy. This vehicle construction technique employs several modular assembly lines rather than being constrained to a single, linear process.

How Tesla is pulling together its long-term vision

Self-driving cars are only the beginning. Tesla is building humanoid robots controlled by AI. The idea is that these robots will provide labor for dangerous or monotonous work, freeing up time for people to pursue more enjoyable endeavors.

Another piece of the company's vision is the sustainable aspect. For this, Tesla looks to its solar energy business. This segment saw a stupendous 67% year-over-year sales growth in 2024, contributing $10.1 billion of the company's $97.7 billion. However, through the first half of 2025, revenue growth in this area has slowed, reaching $5.5 billion compared to $4.6 billion last year.

Of course, Tesla's far-reaching objectives will take years to accomplish, and 2025 was a tough one for several reasons. Business performance was hindered by macroeconomic factors, which include tariffs combined with a drop in Tesla's popularity due to the actions of its divisive CEO, Elon Musk.

That said, the company managed to achieve a record number of vehicle deliveries and energy storage product deployments in the third quarter, although that's likely due to consumers rushing to take advantage of federal EV tax credits before they expired in September. Full business performance details will be unveiled on Oct. 22, when it's scheduled to release its Q3 earnings report.

Is now the time to buy Tesla stock?

Tesla's Model S launch demonstrated its ability to deliver technological innovation and execute on goals others thought unattainable. Its "sustainable abundance" plan is even more ambitious, but perhaps it can repeat the Model S feat.

The company's vision of a futuristic world with AI, autonomous vehicles, and humanoid robots has the potential to fundamentally change society. But Tesla must advance its robotaxi service as an initial step on this path.

If that proves successful, Tesla stock could skyrocket. In fact, shares are up around 80% over the past 12 months through Oct. 8. Yet as a result, its share price valuation has soared.

This chart looks at Tesla stock's price-to-earnings (P/E) ratio, which indicates the amount investors are prepared to pay for each dollar of earnings over the trailing 12 months, revealing it's higher in October than it's been over the past year.

Data by YCharts.

With a P/E multiple of around 250, Tesla stock is quite expensive. The sky-high valuation creates risk when investing in shares right now.

If you believe in Tesla's vision and that the company can achieve success with its robotaxi service and robots out of a sci-fi movie, then the prudent approach is to wait for the share price to drop before deciding to invest. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Robert Izquierdo has positions in Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Shares of semiconductor chip leader Nvidia (NASDAQ: NVDA) have been riding a rocket ship, particularly after the astounding announcements of investments in Intel and ChatGPT creator OpenAI. The stock is up about 40% this year.

The deals demonstrate Nvidia's expansion beyond merely selling AI products. The company is taking a larger role in driving changes to the cloud computing market, where artificial intelligence systems are housed.

These partnerships mark a new chapter in the company's storied history. Does this mean now is the time to scoop up Nvidia shares? Let's dive into the implications of these deals to find out.

Nvidia's team-up with Intel

In September, Nvidia announced a $5 billion investment in Intel. The AI leader's decision to partner with the ailing semiconductor giant was an interesting choice.

The once-dominant Intel has struggled for years as it missed the boat on mobile device technology and, more recently, AI. These issues are reflected in its stock's price-to-book (P/B) ratio, which plunged to a multi-year low last year. But Nvidia stands to gain in more far-reaching ways beyond capitalizing on Intel's low valuation.

As a fabless semiconductor company, Nvidia outsources the manufacturing of its cutting-edge AI chips. It plans to leverage Intel's manufacturing facilities to build AI products for data centers and PCs, but that's just one benefit of the deal.

In describing the partnership, Nvidia CEO Jensen Huang said, "Together, we will expand our ecosystems and lay the foundation for the next era of computing." That era involves AI factories.

AI factories and Nvidia's OpenAI partnership

For some time, Huang predicted the arrival of a new industrial revolution, one requiring AI factories where the output is intelligence. These factories are data centers designed to support the level of computing power needed for AI.

But many of today's data centers are not up to the task. This is where Nvidia's deals with Intel and OpenAI come in. The trio will work together to fill this gap.

One example of AI factories coming to pass is the British government's goal to expand the country's AI computing infrastructure by 20 times over the next five years. To that end, the U.K. partnered with OpenAI, and in turn, OpenAI enlisted Nvidia to provide as much as 31,000 AI chips.

On top of that, Nvidia announced a separate deal with OpenAI that's much larger and far reaching. The semiconductor titan will invest $100 billion in OpenAI. In return, OpenAI commits to using Nvidia products to build out the massive AI infrastructure needed to advance its artificial intelligence models. This requires a staggering number of Nvidia's AI chips, estimated to stretch into the millions.

The collaborations with OpenAI and Intel suggest spectacular sales growth ahead for Nvidia, even though it faces geopolitical hurdles to selling AI chips to China, one of the largest AI markets in the world. In April, the Trump administration implemented requirements that hurt Nvidia's China sales. Then in September, Chinese businesses were banned from buying Nvidia products by their government.

Weighing whether to pick up Nvidia stock

Despite the challenges, Nvidia's revenue continues to climb. In its fiscal second quarter, ended July 27, sales increased 56% year over year to $46.7 billion. In fiscal Q3, the company forecasted revenue to accelerate to $54 billion, and that's accounting for a lack of sales to China.

Nvidia's outsized success, combined with news of its Intel and OpenAI collaborations, helped to propel its stock to an all-time high of $191.05 on Oct. 2. The achievement raises the question whether now is the time to buy shares.

To evaluate its share price valuation, here's a comparison of Nvidia stock's price-to-earnings (P/E) ratio against that of longtime semiconductor chip rival Advanced Micro Devices.

Data by YCharts.

Although AMD's P/E ratio is lower than it was a year ago, Nvidia's remains lower. This indicates Nvidia stock is the better value. That said, an earnings multiple hovering around 54 is not cheap.

An argument can be made that Nvidia stock is worth the premium. The company holds a commanding position in the AI chip industry, controlling an estimated 94% market share.

This dominance, combined with strategic partnerships with Intel and OpenAI to meet the increasing demand for AI computing power, make Nvidia a worthwhile investment for the long term. But after the stock hit an all-time high, it's ideal to wait for shares to pull back a bit before deciding to buy. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Is Nvidia stock a buy after AI partnerships with Intel and OpenAI? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Robert Izquierdo has positions in Advanced Micro Devices, Intel, and Nvidia. The Motley Fool Australia’s parent company, Motley Fool Holdings Inc., has positions in and has recommended Advanced Micro Devices, Intel, and Nvidia. The Motley Fool Australia’s parent company, Motley Fool Holdings Inc., has recommended the following options: short November 2025 $21 puts on Intel. The Motley Fool Australia has recommended Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The arrival of ChatGPT in 2022 instantly made OpenAI one of the key players in the artificial intelligence (AI) space. On Sept. 16, the company announced an AI infrastructure project called Stargate UK, whereby it is partnering with other businesses and the British government to boost AI tech in the United Kingdom.

This followed the government's call "to make sure that Britain maintains its position as a world leader in AI." To do so, the country plans to increase its computing capacity by a minimum of 20x by 2030, with Stargate serving as a step toward that goal.

Great Britain's flurry of AI activity this year led Nvidia CEO Jensen Huang to declare, "The U.K. will be an AI superpower." While OpenAI's Stargate project helps the British government meet its AI objectives, it also creates opportunities for Amazon (NASDAQ: AMZN) and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL). Here's what investors should know about Stargate UK's implications for this pair of tech giants.

How Stargate UK helps Amazon and Alphabet

The Stargate UK initiative illustrates why the AI market is expected to see incredible growth in the coming years. Analyst forecasts estimate the industry will hit $244 billion in 2025 and expand to $1 trillion by 2031 as businesses and governments around the world rush to adopt AI. OpenAI's Stargate can't support this level of expansion alone, which will enable Amazon and Alphabet to gain from the rising demand for computing capacity.

Both possess some of the world's largest cloud computing infrastructure. Amazon is the global leader here, and Alphabet is third behind Microsoft. Building on this success, they have constructed custom semiconductor chips to power their AI systems, creating competitors for Nvidia's pricey AI chips. This allows them to enhance AI performance while managing costs, which can help them capture customers.

In addition, Amazon partnered with artificial intelligence start-up Anthropic last year, integrating the latter's AI models into Amazon's services.

Meanwhile, Alphabet's research division, Google DeepMind, achieved a milestone on the path to artificial general intelligence. DeepMind's AI became the first to win a gold medal in an international computer programming competition, demonstrating AI's potential to match human thinking. DeepMind is based in the U.K.

Factors contributing to Amazon and Alphabet's AI might

Such AI advancements mean Amazon and Alphabet are well placed to meet the growing artificial intelligence needs of organizations, which require technologies tailored to the unique demands of AI systems.

The two companies now find themselves in a technological position similar to that of the broadband providers that replaced dial-up providers in the early days of the internet.

Moreover, Amazon and Alphabet continue to invest heavily in tech infrastructure to power their AI ambitions. Alphabet poured $67 billion into capital expenditures over the trailing 12 months through the second quarter. Amazon's capex was an astounding $103 billion over the same period.

Alphabet committed 5 billion pounds in support of the British government's AI efforts, including the opening of a data center near London on Sept. 16, coincidentally, the same day OpenAI announced Stargate UK. Amazon aims to rival Stargate's scale through Project Rainier, which the company calls "the world's most powerful computer for training artificial intelligence (AI) models."

The pair can afford these costs. After its $67 billion in capex spending, Alphabet was left with $66.7 billion in free cash flow (FCF) over the last 12 months through Q2. Amazon's FCF was $18.2 billion over that time.

Investing in these quiet winners

With AI as the latest growth driver for Amazon and Alphabet's businesses for years to come, now is a good time to consider scooping up their stocks. Here's a look at each one's share price valuation using the price-to-earnings (P/E) ratio, which reflects what investors are willing to pay for every dollar of earnings based on the trailing 12 months.

Contrasting these numbers against those of AI luminaries Microsoft and Nvidia provides some context. OpenAI is collaborating with Nvidia on the Stargate UK project, while Microsoft invested billions of dollars in OpenAI.

Data by YCharts.

The chart shows Amazon and Alphabet sport more attractive valuations than Microsoft and Nvidia, as indicated by the lower P/E ratios. In fact, Amazon's earnings multiple has dropped from last year, and while Alphabet's has risen, it remains considerably below those of its AI counterparts.

This suggests the potential upside from the U.K.'s AI investments may not be fully baked into Amazon and Alphabet's stock prices, given that they are indirect beneficiaries of the Stargate deal. Investing in these major AI companies now offers an opportunity for share price appreciation over the long term as the AI sector expands. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Amazon and Alphabet could be quiet winners of the U.K.'s Stargate artificial intelligence (AI) deal appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Robert Izquierdo has positions in Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Key Points

• Nvidia’s stock has enjoyed a run-up since crashing after President Donald Trump’s tariff announcement.
• Thanks to strong sales, Nvidia’s net income grew an impressive 59% year over year.
• Nvidia expects AI infrastructure spending to increase in the coming years, fueling further demand for its products.

Nvidia (NASDAQ: NVDA) shares are trading up about 30% this year, through the week ending Aug. 29, driven by the frenzy around artificial intelligence (AI). The semiconductor chipmaker's stock bounced back from a 52-week low reached on April 7 after President Donald Trump's announcement of new tariffs triggered a stock market crash.

Just because Nvidia's share price rebounded doesn't mean you missed the boat to buy. One factor suggesting Nvidia stock still has room to run is its share price valuation.

Gauging Nvidia stock's valuation

The price-to-earnings (P/E) ratio is a common method to assess the value of Nvidia stock. Comparing it to some of the company's AI semiconductor competitors, such as Advanced Micro Devices and Broadcom, can offer valuable insights.

Data by YCharts.

The chart reveals Nvidia's earnings multiple is significantly below that of AMD and Broadcom, indicating its stock is a better value. In fact, its current P/E ratio of about 50 is lower than it was last year when it was trading at all-time highs, so its valuation has improved.

Nvidia's performance explains why. For its fiscal second quarter, ended July 27, its net income soared 59% over the prior year to $26.4 billion as revenue rose 56% year over year to $46.7 billion.

Nvidia's share price dropped after Q2 results showed its data center revenue missed Wall Street's expectations, creating a buy opportunity.

Part of the shortfall was due to the U.S. government blocking AI chip sales to China. Consequently, Nvidia excluded the region from its forecast fiscal Q3 revenue of $54 billion. Even so, that figure is a substantial increase from the previous year's $35.1 billion, demonstrating demand for Nvidia products isn't slowing down.

The company's management predicts AI infrastructure spending will hit at least $3 trillion by 2030. While forecasts vary widely, with some predicting global capital expenditures will exceed $7 trillion by the end of the decade, AI spending to date has shown explosive expansion, which means Nvidia could see more years of revenue growth ahead.  

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Robert Izquierdo has positions in Advanced Micro Devices, Broadcom, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Broadcom. The Motley Fool Australia has recommended Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Key Points

• Quantum Computing Inc. and Nvidia seek to unlock the potential of quantum computers, albeit through vastly different approaches.
• Quantum Computing Inc. focuses on photon-powered quantum machines, and holds a significant cash sum of nearly $350 million to fund its operations.
• Nvidia is leaning on its know-how from past technological triumphs to solve the formidable obstacles in quantum computing.

Many technology companies are aggressively pursuing quantum computing, and for good reason. Quantum computers are capable of complicated calculations that aren't feasible with today's mightiest supercomputers.

Given the capability of these groundbreaking devices, investing in the field makes sense. Among the businesses to choose from, two to consider are Quantum Computing Inc. (NASDAQ: QUBT), which also refers to itself as QCi, and Nvidia (NASDAQ: NVDA).

The former is a pure-play quantum company. The latter is a veteran tech titan that has dominated the semiconductor chip market for artificial intelligence.

Are both solid investments for the quantum era, or does one stand out as the better choice? Here's a closer look into each business to understand which one wins and why.

A look into Quantum Computing Inc.

As a company specializing solely on quantum computing, QCi can dedicate all its resources to the development and commercialization of quantum tech. Unlike a conglomerate such as Nvidia, there's little risk of a priority shift to another part of its business.

This allows QCi to drive hard and fast toward quantum advantage, which marks the point when a quantum device can solve useful, real-world problems more effectively than current computers.

QCi's path to quantum advantage is to employ light particles, called photons, to power its devices. The approach enables a wide range of applications.

For example, it developed remote sensing and imaging equipment for use over long distances and through interference. As a result, QCi won a contract with NASA.

However, its tech hasn't translated into revenue growth. In the second quarter, sales totaled a mere $61,000 compared to $183,000 in the prior year.

While Q2 revenue plunged 67%, QCi's operating expenses soared 91% year over year, resulting in an operating loss of $10.2 million, nearly double its $5.3 million loss in 2024. This is a concerning trend, but the company's cash hoard of $348.8 million on its Q2 balance sheet can sustain operations in the short term while it searches for sales.

Nvidia's quantum computing approach

Nvidia has a long history of building cutting-edge tech. This focus on innovation now extends to the development of chips for quantum computing.

The current AI era was ushered in by Nvidia's seminal work on its graphics processing unit (GPU), invented in 1999. The GPU wasn't designed to replace the classic computer's CPU. Instead, GPUs served as separate processors handling specialized tasks, such as crunching the data used by AI.

Now, Nvidia is applying the same framework to its quantum processing unit (QPU). The company is not trying to supplant the GPU, but rather, have it work in concert with the QPU.

This is important because a key challenge with quantum computers is that the atomic particles that enable phenomenal computational abilities are prone to making mistakes. As the QPU executes calculations, GPUs can deliver real-time error correction.

The new quantum computing frontier could eventually boost Nvidia's revenue much like AI has done. The company's GPU technology produced sales of $46.7 billion in its fiscal second quarter, ended July 27. That's an impressive 56% year-over-year increase, as cloud service providers gobbled up GPUs to power their AI systems.

Propelled by the current AI boom, Nvidia expects strong sales growth to continue in Q3 with estimated revenue of $54 billion, a substantial step up from the prior year's $35.1 billion. Once quantum advantage is reached, quantum computers could lead to the next phase of sustained revenue growth for Nvidia.

Making a choice between Quantum Computing Inc. and Nvidia stock

Although the technology holds the same kind of transformative potential as AI, quantum computers are still nascent. It could be years before these machines are ready for adoption beyond research circles.

Consequently, there's no way to know at this point whether Quantum Computing Inc. or Nvidia's tech will eventually prove successful. So to decide which to invest in now, another factor to consider is share price valuation.

This can be determined by looking at the price-to-sales (P/S) ratio, a commonly used metric measuring how much investors are willing to pay for every dollar of revenue generated over the trailing twelve months.

Data by YCharts.

The chart reveals QCi's P/S multiple has soared over the past year, and is shockingly high compared to Nvidia's. This suggests Quantum Computing Inc. shares are overpriced.

Taking into consideration Nvidia's better stock valuation, ongoing sales growth, and history of technological success, the semiconductor giant is the superior investment over QCi in the field of quantum computing. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Better quantum computing stock: Quantum Computing Inc. vs. Nvidia appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Robert Izquierdo has positions in Nvidia. The Motley Fool Australia’s parent company, Motley Fool Holdings Inc., has positions in and has recommended Nvidia. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The "Magnificent Seven" are giants of the stock market, and among them, Apple (NASDAQ: AAPL) and Amazon (NASDAQ: AMZN) stand out as preeminent consumer companies. Both have delivered high-tech advances over the years.

But if you had to choose between them, would Apple or Amazon be the better investment for the long run? A deciding factor between future prosperity or obsolescence could lie in how each tackles the latest technological innovation: artificial intelligence (AI).

Amazon CEO Andy Jassy sees the rise of AI as a watershed moment: "Generative AI is going to reinvent virtually every customer experience we know, and enable altogether new ones about which we've only fantasized."

Here's an examination of Apple and Amazon's approaches to this transformative technology, in order to identify the superior long-term investment.

Apple's approach to AI

Apple seemed to take an early lead in AI with the arrival of digital assistant Siri on the iPhone in 2011. Since then, the company has chosen to partner rather than invest in the costly infrastructure needed for AI systems. For instance, Apple used Alphabet-owned Google's custom semiconductor chips to train its AI software, and integrated OpenAI's ChatGPT to supplement Siri.

As a result, Apple has been accused of falling behind its rivals in the AI race. The accusations have some merit. At Apple's Worldwide Developers Conference in June, the company announced its latest AI updates, such as real-time translation services. Its new AI capabilities were underwhelming, while meaningful updates to its proprietary Apple Intelligence aren't expected until 2026.

However, AI's evolution is a marathon, not a sprint. Industry forecasts estimate the AI market will expand from $244 billion in 2025 to $1 trillion by 2031. There's time for Apple to capitalize on the sector's growth, so the company's slow AI progress isn't a death knell.

Moreover, Apple could acquire an AI business to give it the ability to rapidly catch up to competitors. After all, Siri was developed by another company before Apple bought the technology.

In addition, Apple's devoted customer base is a strength here. Loyal consumers are likely to wait for more robust AI features.

The company's ability to keep customers coming back for more translated into sales of its iconic iPhone remaining above $200 billion for the past three years. Despite sparse AI features, Apple looks likely to repeat the feat: iPhone sales in its current fiscal year's first half, which ended March 29, totaled $116 billion compared to the prior year's $115.7 billion.

Amazon's AI achievements

Amazon's AI approach has been to go all in on the technology. In the first quarter of 2025, the company spent $24.3 billion on capital expenditures (capex), primarily to build up tech infrastructure. This included its Amazon Web Services (AWS), the global leader in cloud computing. Contrast this to Apple's fiscal Q2 capex of about $6 billion.

Those AI investments led to AWS sales growing 17% year over year to $29.3 billion. But the long-term payoff is poised to be far bigger, given Amazon's slew of AI enhancements.

This year the company released Alexa+, the next evolution of Siri's rival. Amazon also uses AI to manage a fleet of more than 750,000 robot workers in its warehouses, and to drive the vehicles for its new robotaxi service, Zoox, which arrives in select cities this year.

Amazon's AI capabilities help it smartly adjust prices across its vast universe of products, taking into account numerous factors from inventory levels to individual shopper behaviors. This helped Amazon grow Q1 sales by 9% year over year to $155.7 billion.

That's just the start. Amazon sees AI as a game changer, and Andy Jassy said: "That's why there are more than 1,000 GenAI applications being built across Amazon."

Making the call between Apple and Amazon

Apple and Amazon both have unique strengths. But does the disparity in their AI abilities tilt the odds in one company's favor? I believe Apple has the potential not only to catch up, but also to deliver groundbreaking products, just as the introduction of its iPhone proved revolutionary for mobile devices.

That said, Amazon is supplying AI capabilities at astonishing speed. As a result, Amazon isn't just improving services for its core e-commerce business, it's tackling entirely new industries, as exemplified by Zoox.

But one other factor to consider is share-price valuation. Here's a look at Apple and Amazon's price-to-earnings (P/E) ratios:

Data by YCharts.

The chart reveals that Amazon's P/E multiple was substantially higher a year ago, but has since dropped, particularly after President Donald Trump's April tariff announcements caused the broader stock market to plunge. Now, it's not too far above Apple's P/E, and given Amazon's AI investments, its higher valuation is arguably warranted.

Taking this and its impressive AI advancements into account, these factors make Amazon the best stock to buy right now over Apple.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Robert Izquierdo has positions in Alphabet, Amazon, and Apple. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon and Apple. The Motley Fool Australia has recommended Amazon and Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

E-commerce is what Amazon (NASDAQ: AMZN) is known for, and that's been a factor in its stock's 1% decline this year through June 26. The S&P 500 rose 4% in that time.

The reason for this disparity is the current macroeconomic climate, clouded by the Trump administration's ever-shifting tariff policies, which inject concern on Wall Street about weakening consumer spending. After all, Amazon competitor Walmart announced that it would raise prices due to tariffs.

But investors looking at the long haul know that these short-term headwinds will pass. In addition, Amazon possesses strengths that position its stock for future growth. Here are three reasons why the company is a good long-term investment.

Amazon's pricing strengths

Amazon is the global leader in e-commerce by market cap, and its immense scale gives it significant leverage when negotiating with suppliers. By procuring products at favorable prices, the company can offer customers highly competitive deals.

This kind of price flexibility is key in the current macroeconomic environment, where consumer spending is at risk of a slowdown. It enables Amazon to execute revenue-boosting opportunities such as its popular Prime Day deals. The company's 2024 Prime Day was its biggest shopping event at the time, and the next is scheduled for July.

On top of that, Amazon's technological prowess further enhances its price strengths. The retailer uses dynamic pricing, which employs sophisticated algorithms to automatically adjust prices based on many factors -- such as inventory levels, competitor prices, and individual shopper behavior -- to incentivize a purchase.

Amazon's first-quarter results demonstrate its ability to succeed despite economic headwinds. Q1 revenue rose 9% year over year to $155.7 billion. The company also expects sales to continue growing, projecting second-quarter revenue of between $159 billion and $164 billion, representing 7% to 11% year-over-year growth.

Amazon's expansive ecosystem

Amazon is steadily broadening its offerings beyond its retail origins to become a provider of many technologies. It's now a platform for all manner of services from logistics to healthcare.

This is illustrated in Amazon extending its e-commerce capabilities to an expanding universe of third-party sellers, enabling them to hawk their wares on the site. A recent example is Saks Fifth Avenue, which launched Saks on Amazon in Q1. And that's just the tip of the iceberg.

The company built up logistics operations to ship products to customers faster, and now offers its delivery capabilities to other sellers. Consequently, third-party seller services contributed $36.5 billion in Q1 revenue, up from $34.6 billion in 2024. But there's more. Third-party sellers also use Amazon's advertising business to promote their products.

This exemplifies how Amazon's offerings can feed off each other. As a result, the company has built up several services into enormous businesses in their own right. For instance, the tech titan is now an advertising juggernaut, generating $13.9 billion in Q1 ad revenue.

Amazon is now eyeing satellite-based broadband to reach people in rural areas through its Project Kuiper service. More people with internet access means a greater pool of potential customers. Project Kuiper is scheduled to launch this year.

Amazon's AI ambitions

Perhaps the greatest reason to invest in Amazon is its advances in artificial intelligence (AI). Today, AI systems live in cloud computing environments to supply the immense computer power needed for AI to execute tasks. Amazon's cloud business, Amazon Web Services (AWS), is the global leader in the space.

With AWS, Amazon achieved a number of AI advances. Its Alexa digital assistant has evolved into the AI-powered Alexa+ this year, which can remember who in your family is a vegetarian for dinner suggestions or recommend when you should leave for work based on traffic conditions.

The company's AI is also behind the army of robot workers in its warehouses, contributing to increasingly faster shipping speeds. This is important according to CEO Andy Jassy, who said: "When we promise faster delivery times, customers complete purchases at a meaningfully higher rate and shop with us more frequently."

AI also literally drives Amazon's new robotaxi service, Zoox. Vehicles in the Zoox fleet have no steering wheels, and are completely controlled by AI. The service will be available in select cities later this year.

More AI solutions are coming. Jassy sees the tech as a game-changer, stating: "Generative AI is going to reinvent virtually every customer experience we know, and enable altogether new ones about which we've only fantasized."

Along with these reasons to invest, now isn't a bad time to consider buying shares. Here's a look at Amazon's stock valuation using the price-to-earnings (P/E) ratio.

Data by YCharts.

The chart shows that Amazon's P/E multiple is lower than it's been over the past year, up until President Donald Trump's April tariff announcements caused the entire stock market to crater.

The company's ability to drive sales through pricing strategies, its vast ecosystem of offerings, and growing AI capabilities position Amazon to not only weather short-term macroeconomics, but to thrive for years to come.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Robert Izquierdo has positions in Amazon and Walmart. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon and Walmart. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The artificial intelligence (AI) industry is enjoying explosive growth, making it a great area to invest in. Forecasts estimate the AI market will expand from $244 billion in 2025 to $1 trillion by 2031. Two standout stocks in the sector are Palantir Technologies (NASDAQ: PLTR) and Nvidia (NASDAQ: NVDA).

Palantir shares have rocketed more than 400% over the past 12 months through the week ending June 20. Nvidia is seeing its stock surging back from a 52-week low of $86.62 in April to near its January peak of $153.13.

Both companies offer reasons to invest in their stocks, but if you had to choose one, which would be the better AI investment for the long run? Here's a look at Palantir and Nvidia to arrive at an answer.

The case for Palantir stock

Palantir is a compelling investment choice because of the massive success of its Artificial Intelligence Platform (AIP). Since AIP's launch in 2023, the company's business has been booming.

For instance, in the first quarter, revenue rose 39% year over year to $883.9 million. Ryan Taylor, Palantir's chief revenue and legal officer, stated, "Unrelenting demand for AIP continues to drive outperformance despite Q1 historically being our slowest quarter due to business seasonality."

Its strong start to 2025 contributed to the company raising its full-year sales guidance from $3.7 billion to $3.9 billion. This represents a substantial increase from 2024's $2.9 billion in revenue.

Not only is AIP successful, the company is expanding its revenue opportunities by offering new AI products. One is Warp Speed, which uses AI to boost U.S. manufacturing efficiencies, such as handling resource planning and anticipating supply chain changes.

About Warp Speed, CTO Shyam Sankar noted, "Both the adoption and the rate of product development has exceeded expectations."

Palantir's sales growth has translated into strong financials. Its Q1 net income reached $217.7 million, more than double 2024's $106.1 million. The company's free cash flow (FCF) of $370.4 million is an impressive 42% year-over-year increase.

Reasons to consider Nvidia stock

The rationale for Nvidia's attractiveness as an AI investment begins with its leadership in semiconductor chips for AI. Its market share in this area is estimated to exceed 70%.

Nvidia's popular AI chips helped sales grow 69% year over year to $44.1 billion in its fiscal Q1, ended April 27. The company isn't resting on its laurels.

Nvidia introduced its latest AI computing architecture, Blackwell, last year and has already announced Vera Rubin as Blackwell's successor. Vera Rubin is expected to arrive in 2026.

What makes Nvidia's new tech compelling for customers is that it's designed for the age of AI reasoning in which AI can more closely mimic human thinking. This ability is essential for agentic AI, which refers to AI systems capable of making decisions and completing tasks on their own.

Nvidia's popular hardware is only part of its strength. It also provides software called the Compute Unified Device Architecture (CUDA). CUDA is an essential tool to customize Nvidia's hardware when building AI systems, and this makes switching costs higher.

Like Palantir, Nvidia's financials are excellent. Fiscal Q1 net income rose 26% year over year to $18.8 billion, while FCF hit $26.1 billion, a 75% increase from the prior year's $14.9 billion.

However, Nvidia's global leadership in AI chips took a step back in China because of U.S. government restrictions on selling AI components to the country. News reports indicate Nvidia is revising its hardware specs to gain approval to commence sales into China once again.

Even without China, Nvidia is poised for years of growth as businesses and governments rush to build AI capabilities. Nvidia CEO Jensen Huang noted, "Countries around the world are recognizing AI as essential infrastructure -- just like electricity and the internet -- and Nvidia stands at the center of this profound transformation."

Deciding between Palantir and Nvidia

Because Palantir and Nvidia are both strong businesses, choosing between them is a challenge. Stock valuation is one factor that can aid in this decision.

Here's a look at each company's price-to-earnings (P/E) ratio, which tells you how much investors are willing to pay for a dollar's worth of a company's earnings based on the trailing 12 months.

Data by YCharts.

As the chart shows, Nvidia's P/E multiple is just a fraction of Palantir's, indicating Nvidia is the better value. In fact, Palantir's P/E ratio has climbed higher in recent months, suggesting the stock is overpriced.

This key factor makes Nvidia's stock the superior investment over Palantir. Beyond valuation, Nvidia's established leadership in AI and its ongoing push to evolve its AI tech positions the company for years of sustained success.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Better artificial intelligence stock: Palantir vs. Nvidia appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Robert Izquierdo has positions in Nvidia and Palantir Technologies. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia and Palantir Technologies. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

In the past year, Google parent Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) lost two key antitrust cases targeted at its search engine and advertising businesses. But the tech giant can appeal these defeats, so they aren't the greatest threat Alphabet faces.

The larger risk to its business right now is artificial intelligence (AI). Consumers are flocking to AI apps such as OpenAI's ChatGPT, so much so that research company Gartner estimates search engines will see a staggering 25% drop in usage next year. This could cause Google's search business to collapse if the prediction comes true.

AI certainly holds the potential to unseat Google's reign atop search engines. In fact, for the first time since 2015, Google's market share dropped below 90% in the fourth quarter of 2024, and was at 89.7% in April.

These signs suggest cracks in Google's armor, so Alphabet must succeed at its own AI efforts if it wants to protect its all-important search business. Here's a deeper look into how the company is faring in the battle for AI supremacy.

Alphabet's answer to the rise of AI

The AI stakes are high for Alphabet. Maintaining Google's search success is essential because this part of Alphabet's business produced $50.7 billion of its $90.2 billion in first-quarter revenue. Alphabet is determined to win at AI. The company spent $52.5 billion in capital expenditures last year as it built out the infrastructure needed to support its AI ambitions. It plans to up that investment to $75 billion in 2025.

The expenditures involve investing in cutting-edge technology to power its AI systems, such as a proprietary Tensor Processing Unit (TPU). Alphabet's TPUs are hardware specifically engineered to efficiently train AI models and boost AI inference, which is a term describing an AI's ability to apply what it has learned to real-world situations.

So far, its AI investments have paid off. Alphabet began inserting AI-generated results into Google's search results nearly a year ago, and as of the end of Q1, CEO Sundar Pichai noted, "We continue to see that usage growth is increasing as people learn that Search is more useful for more of their queries" thanks to AI.

Moreover, according to Alphabet management, Google's revenue generation remains at the same rate as before AI was introduced, which indicates the company's addition of AI didn't take away from its ability to earn income from search queries. In fact, Google's $50.7 billion in Q1 search revenue represented growth from the prior year's $46.2 billion.

Alphabet's AI efforts in other areas of its business

AI is also a central component to Alphabet's success in other parts of its operations. One of these is its cloud computing business, Google Cloud. Through the Google Cloud platform, the conglomerate makes its AI tech available for other companies to use. Customers building AI through Google Cloud include Verizon Communications and Loews. Because of growth in AI adoption by other firms, Google Cloud's Q1 sales increased an impressive 28% year over year to $12.3 billion.

Alphabet's AI accomplishments also extend to its self-driving car business, Waymo, which uses AI to make driving decisions. As of Q1, Waymo is providing over 250,000 passenger rides per week, a fivefold increase from the prior year. Waymo's growing popularity is another example of Alphabet's accomplishments with AI.

Evaluating if Alphabet is a good AI stock to invest in

Alphabet's AI achievements demonstrate it's succeeding with artificial intelligence. Every product the company owns -- representing at least half a billion users -- is using Alphabet's AI now. This is translating into revenue growth with Q1 sales hitting $90.2 billion, up from the prior year's $80.5 billion.

And now is a good time to scoop up Alphabet shares. That's because its stock valuation looks reasonable when comparing Alphabet's price-to-earnings (P/E) ratio to competitors Meta Platforms and Microsoft. Meta is second only to Alphabet in terms of digital advertising market share, and has also invested heavily into AI. Microsoft competes against Alphabet across the search, advertising, and cloud computing markets.

Data by YCharts.

Alphabet's P/E multiple is the lowest among its competitors, indicating its stock is a better value. A combination of economic uncertainty fueled by President Donald Trump's tariff policies and the loss of federal antitrust lawsuits contributed to Alphabet's P/E ratio declining over the past year.

Although the challenges of economic volatility and ongoing antitrust battles will persist in the short term, these are transitory, unlike the secular trend of AI that will play out over the long haul. Despite Google's search market share dipping below 90%, it still holds a massive lead over competitors. OpenAI's ChatGPT is predicted to reach 1% search engine market share this year, but that's still a far cry from Google's share.

Alphabet's strategic AI investments are bearing fruit, and its relatively low valuation makes Alphabet an attractive AI investment for the long term.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Robert Izquierdo has positions in Alphabet, Meta Platforms, Microsoft, and Verizon Communications. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Meta Platforms, and Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Gartner, Loews, and Verizon Communications and has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Meta Platforms, and Microsoft. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Shareholders of Google's parent Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) are going through a rough patch. In the past year, Google lost two major antitrust cases aimed at the heart of its business.

Last August, Google's search engine was deemed an illegal monopoly. Then in April, the tech giant suffered another legal defeat in an antitrust case involving its digital advertising business.

Does this double blow signal it's time for Alphabet shareholders to sell their stock? Perhaps the prudent approach is holding shares and waiting out the storm.

Or considering Alphabet stock is well below the 52-week high of $207.05 reached in February, is now the time to scoop up shares? Evaluating a course of action requires diving into the company in more detail.

A look at Alphabet's antitrust losses

The court rulings against Google understandably raise concerns about the company's future. After all, the search engine brought in $50.7 billion of Alphabet's $90.2 billion in first-quarter revenue through advertising. However, the company plans to appeal the verdicts, so the antitrust cases could play out in court for years.

Additionally, it's insightful to examine a similar situation Microsoft faced when it lost an antitrust lawsuit in 1998 over bundling its Internet Explorer web browser and ubiquitous Windows software. The court ordered the breakup of Microsoft, but the tech titan won its appeal, and the case was settled without a breakup.

So Alphabet's defeat in these antitrust cases doesn't signal a dire situation for the company at this point. That said, rather than the antitrust lawsuits, an arguably bigger challenge to Google's business is the rise of artificial intelligence (AI).

Is AI the real threat to Google?

According to research firm Gartner, search engine usage is set to drop by a massive 25% in 2026 as people favor AI tools instead. These apps include OpenAI's ChatGPT.

Google is racing to stay relevant to consumers with the creation of its own AI capabilities. The company injected AI-generated results in searches, and is experiencing excellent outcomes.

Google's Q1 search revenue rose from $46.2 billion in 2024 to $50.7 billion this year. Its new AI Overview is used by over 1.5 billion people per month, and Google is generating revenue at the same rate as before the introduction of its AI features.

AI is a key component in many areas of Alphabet's company. For example, its Waymo autonomous car business relies on AI to make driving decisions. Waymo serviced 4 million passenger trips in 2024, and at the end of Q1, weekly paid passenger rides were up fivefold from the prior year. Waymo is expanding into new markets in 2025, demonstrating the success of Alphabet's AI under the demanding conditions of vehicle driving.

Artificial intelligence is so important to Alphabet's future, the company is investing heavily in its AI infrastructure. Last year it spent $52.5 billion in capital expenditures, and it's spending even more in 2025, upping the investment to $75 billion.

The company can do this because of its hefty free cash flow (FCF). In Q1, Alphabet produced $19 billion in FCF.

What to do with Alphabet stock

After unpacking Google's situation post-antitrust verdicts, selling Alphabet shares seems a hasty move right now. The court cases are likely to drag on for some time as Alphabet appeals.

So any impact to its business could be years away, or even minimal, if Alphabet wins an appeal as Microsoft did. Therefore, if you're a shareholder, hang on to Alphabet stock.

But what about investing in Alphabet? Its stock price dropped over recent weeks due to a stock market crash, which hit after President Donald Trump unveiled his "Liberation Day" tariff plans on April 2, and the second antitrust ruling, announced April 17. These factors contributed to Alphabet stock's price-to-earnings (P/E) ratio falling to its lowest level in a year.

Data by YCharts.

Consequently, Alphabet's P/E multiple is the lowest among its top competitors in the digital advertising space, meaning its stock is the best value. Facebook parent Meta Platforms is second only to Google in the digital ad industry, while Amazon is in third place.

Google's ability to increase revenue, and successfully incorporate AI, coupled with Alphabet's attractive P/E ratio, makes its stock a worthwhile long-term investment. So if you own shares, consider adding to your position. If you don't have Alphabet stock, now is a good time to buy.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Robert Izquierdo has positions in Alphabet, Amazon, Meta Platforms, and Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Meta Platforms, and Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Gartner and has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Amazon, Meta Platforms, and Microsoft. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Perhaps no stock exemplified the past year's artificial intelligence (AI) frenzy more than Nvidia (NASDAQ: NVDA). The semiconductor chipmaker's business benefitted as tech companies spent billions of dollars to buy its AI offerings. Shares of Nvidia were up nearly 90% over the past 12 months through the end of January.

But when Chinese start-up DeepSeek announced on January 27 it produced a large language model (LLM) for less than $6 million, a fraction of the money spent by U.S. companies, Nvidia shares plunged 17%. The stock since recovered, but it's still below the 52-week high of $153.13 reached on January 7.

Does this create a buying opportunity? Or is DeepSeek threatening to upend Nvidia's future earnings? Read on to learn if Nvidia remains a worthwhile long-term investment in AI.

Does DeepSeek's arrival threaten Nvidia's business?

DeepSeek's AI price tag was shockingly low, prompting concerns that Nvidia will lose business. If one company were able to produce the AI technology inexpensively, others could do so without Nvidia's pricey products.

But the Chinese start-up's success is unlikely to impact Nvidia in a substantial way for several reasons. For starters, it's possible DeepSeek used restricted advanced AI chips. The U.S. Commerce Department is investigating that possibility.

In addition, ChatGPT creator OpenAI accused DeepSeek of stealing OpenAI's data to make its software. AI requires mountains of data to perform tasks, so if DeepSeek inappropriately used OpenAI's content, that's another reason others may not be able to replicate LLMs on the cheap.

Moreover, the U.S. is in a battle with China for digital supremacy. This led to export restrictions on the sale of AI chips to China. After DeepSeek's arrival, more restrictions may be coming, which would make it challenging for other Chinese companies to develop low-cost LLMs.

The U.S.-China rivalry may also result in DeepSeek being banned. The DeepSeek AI technology is already barred by federal agencies such as the U.S. Navy and NASA.

The U.S. passed a law banning another Chinese company, TikTok, over privacy and security concerns. President Donald Trump paused the ban's implementation, but eventually it will happen unless Congress reverses it or TikTok is sold to a U.S. business. Given how much AI relies on data to function, banning DeepSeek and other Chinese AI companies makes more sense than banning TikTok.

A U.S. ban is not the only possibility. Italy banned DeepSeek at the time of this writing. Such actions by other nations would curb AI competition from China.

Nvidia's many strengths

These factors indicate Trump's recently announced Stargate project, which calls for up to half a trillion dollars in AI infrastructure investment, will proceed as planned. Nvidia is one of the companies working on the project.

Nvidia CEO Jensen Huang met with Trump on January 31 to discuss AI policy. That level of access and input into U.S. AI strategy means Nvidia is positioned to benefit as policies evolve.

After all, Nvidia is already seen as the preeminent AI chip provider. Its reputation helped it achieve record revenue of $35.1 billion in its fiscal third quarter, ended October 27, 2024. This represents an impressive 94% increase from a year ago.

On top of its revenue growth, the company's other financials are outstanding, illustrating its strong underlying business. Its Q3 net income of $19.3 billion was a 109% increase from the prior year. Its Q3 balance sheet contained $96 billion in total assets, including $38.5 billion in cash, cash equivalents, and investments. Nvidia's cash hoard alone is greater than its Q3 total liabilities of $30 billion.

Adding to this, the chipmaker's latest computing architecture, Blackwell, is selling well. CFO Colette Kress said on the earnings call, "We are on track to exceed our previous Blackwell revenue estimate of several billion dollars."

The company is also more than an AI company. Its chips are used in other industries, such as in robotics, PCs, gaming consoles, and the automotive sector as cars increasingly add more digital capabilities.

To buy or not to buy Nvidia stock

Nvidia's strong financials and revenue growth, the popularity of its products, and the diverse range of applications for its chips put the company in a position to prosper for years to come, making its stock an excellent long-term AI investment. And now is a good time to buy shares.

That's because of Nvidia's stock valuation. Here's a look at its price-to-earnings (P/E) ratio, which tells you how much investors are willing to pay for a dollar's worth of earnings.

Data by YCharts.

Nvidia's P/E multiple is on the low end of where it's been over the past year at the time of this writing. This indicates the company's shares are reasonably priced compared to the past.

Its stock valuation adds to its strong business, making now a good time to scoop up shares of this leading AI chipmaker ahead of its fiscal Q4 earnings report on February 26.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Is Nvidia stock a buy right now? appeared first on The Motley Fool Australia.

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Robert Izquierdo has positions in Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

While tech stocks were hammered in 2022, the cloud computing industry barreled along at an impressive growth rate. According to research firm Gartner, the public cloud sector alone is estimated to grow 20% this year.

This amounts to nearly half a trillion dollars in 2022. Just a decade ago, global public cloud computing revenue was a mere $26.4 billion.

Given the cloud industry's rapid expansion, competitors abound. Among the bigger players are tech giants IBM (NYSE: IBM) and Google Cloud, owned by Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG).

Both are seeing strong growth in their respective cloud businesses. But if you had to choose between the two, which company offers the better investment opportunity? Let's dig into each to arrive at an answer.

IBM's cloud strategy

IBM spent the past few years reinventing itself into a hybrid cloud-focused company. In a hybrid cloud implementation, a business employs both public and private clouds, using the former to perform basic IT infrastructure tasks, such as hosting a corporate website, and the latter to secure confidential or critical data, including financial and customer records.

IBM was smart to focus on this area. The hybrid cloud market is forecasted to grow from $85.3 billion last year to $262.4 billion by 2027.

In addition, IBM's impressive list of enterprise clients is an ideal fit for hybrid cloud solutions. Big Blue's customers include the top ten banks, governments, and healthcare companies in the world. These industries need the security of a private cloud while capturing the cost savings of a public one.

IBM's hybrid cloud strategy proved successful. In its third-quarter earnings report, IBM generated revenue of $14.1 billion, a 6% increase over 2021. This is the third consecutive quarter of year-over-year revenue growth despite macroeconomic headwinds, such as a strong U.S. dollar.

Big Blue also offers an attractive dividend, yielding about 4.8% at the time of this writing. The company can maintain this robust dividend thanks to its free cash flow (FCF). IBM expects to hit $10 billion in FCF this year, while dividend payments totaled about $6 billion over the trailing 12 months.

IBM has a strong dividend track record, paying consecutive quarterly dividends since 1916. It also raised its dividend in April, marking 27 consecutive years of dividend increases.

Alphabet's Google Cloud approach

Alphabet is building its Google Cloud business in the same way it generated success for its famed Google search engine: by prioritizing customer acquisition and revenue growth over profitability.

That's why Google Cloud is currently unprofitable, exiting the third quarter with an operating loss of $699 million. But its business is growing rapidly. In just three quarters this year, Google Cloud's sales nearly matched all of 2021's income, continuing a multi-year streak of rising revenue.

Data source: Alphabet. YOY = year-over-year.

Google Cloud comprised only about 10% of Alphabet's Q3 revenue, but it's already ranked the third-biggest cloud computing company behind industry leaders Amazon and Microsoft. And Alphabet continues to aggressively invest in Google Cloud despite closing down other bets such as its Stadia video games division.

For instance, Alphabet acquired cybersecurity firm Mandiant in September for $5.4 billion, marking one of the company's biggest acquisitions in its history. Mandiant will boost Google Cloud's security in a world where remote workers grew from 23% of the American workforce before the coronavirus pandemic to nearly 60% in 2022.

Is IBM or Alphabet the better investment?

Both IBM and Alphabet have proven successful in their cloud endeavors, so investing in either is worthwhile. After all, the cloud computing industry is forecasted to grow from $706.6 billion last year to $1.3 trillion by 2025.

But if I had to choose one of these cloud computing companies to invest in, I would lean toward Alphabet despite IBM's success and attractive dividend.

Google Cloud's revenue is already edging past Big Blue. IBM's hybrid cloud revenue over the past 12 months totaled $22.2 billion. Google Cloud's revenue was $24.5 billion over the same time period.

Granted, Google Cloud's success can be overshadowed by Alphabet's digital advertising business, which accounted for $54.5 billion of its $69.1 billion in Q3 revenue. And the advertising industry is experiencing a downturn this year, leading Alphabet's Q3 ad revenue to increase just 2.5% year-over-year.

But Alphabet's ad business helps fund Google Cloud. Alphabet generated $63 billion in FCF over the past 12 months, while IBM expects to achieve a cumulative FCF total of $35 billion across three years, from 2022 to 2024.

Also, Alphabet possesses several factors, along with Google Cloud, that make the company an alluring investment, including its dominance in search advertising. Alphabet increased revenue 41% year-over-year in 2021, and its revenue continues to grow this year, reaching $206.8 billion over three quarters compared to $182.3 billion last year.

Google Cloud's strong growth, Alphabet's hefty FCF, and the company's other areas of strength provide compelling reasons to make Alphabet the better choice for an investment in the rapidly rising cloud computing industry. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Better cloud computing stock: IBM vs. Alphabet appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Robert Izquierdo has positions in Alphabet (A shares), Amazon, IBM, and Microsoft. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Gartner. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Among the tech sector's luminaries stands Apple (NASDAQ: AAPL), a well-regarded stock among many investors, including Warren Buffett. His Berkshire Hathaway owns a sizable chunk of Apple stock (over 900 million shares), but that strong endorsement alone doesn't justify an investment.

The potential to buy the stock at a discount does hold some sway. Apple's stock price hit a 52-week high of $182.94 on January 4, but it has fallen since then along with the broader market due to macroeconomic fears such as inflation. The price is down almost 26% from that high. The current financial environment creates uncertainty, but now may actually be a great time for investors with an eye toward the long term to pick up shares.

But there are at least three other solid reasons why this business can weather the present economic storm and continue to be a solid investment over the long run.

1. Apple keeps people coming back for its products

It's no surprise the company that became famous for ushering in the personal computer era and the iconic iPhone would generate the bulk of its income from these products. In its fiscal 2022 second quarter (ended March 26), Mac and iPhone products comprised more than $60 billion of the company's $97.3 billion in sales.

The iPhone, in particular, is Apple's bread and butter. iPhone sales in the company's fiscal Q2 represented more than half of all revenue at $50.6 billion. This has been the case for years, and Apple's iPhone development efforts have what it takes to continue this growth.

Consumers are in the midst of transitioning to mobile phones that support new, more powerful 5G wireless networks. Apple released 5G-compatible iPhones in the fall of 2020, which helped propel fiscal 2021 iPhone sales to a 39% year-over-year increase after falling 3% in the prior fiscal year. The company is also releasing scaled-back, lower-priced models to go after segments of the market it had previously ignored.

Given rising inflation and threats of a recession, I wouldn't be surprised if iPhone purchases slowed in the short term when compared to fiscal 2021's blistering sales. But as consumer 5G adoption increases from 8% last year to an estimated 25% by 2025, so will iPhone purchases, ensuring Apple's bread and butter remains intact over the long run.

2. Apple is not just a hardware company

It's understandable to assume Apple will be hurt by inflation. Rising prices might force some consumers to hold off buying Apple's latest devices. But Apple isn't just a hardware company. For years, it quietly built a slew of software-as-a-service (SaaS) offerings that generate recurring revenue through subscriptions.

Apple's services segment encompasses its AppleCare warranty and repair program, digital payments, cloud storage, advertising products, and digital content, which includes music, movie, TV, and video game subscriptions. This division has seen steadily rising revenue over the years, going from $46.3 billion in fiscal 2019 to $68.4 billion in fiscal 2021.

The segment got a boost from advertising revenue when Apple changed its ad policies last year to bolster consumer privacy. Customers can now block third-party apps from targeting them with ads. Consequently, companies reliant on advertising, such as Facebook parent Meta Platforms, saw revenue from their iPhone apps dramatically decline. Meanwhile, Apple benefited as advertisers shifted budgets to its ad products.

Cloud subscriptions are another key contributor to services' sales growth. With our ever-increasing reliance on digital content, such as photos taken with mobile phones, consumers need a place to store that content. Apple's cloud provides a solution. Since we're unlikely to remove the hundreds, even thousands (in my case), of photos and other content uploaded to Apple's cloud, the company has a revenue stream resilient to macroeconomic challenges.

3. Apple has built a self-sustaining ecosystem

The third reason to invest in Apple is the ecosystem it built through a symbiosis of its products and services. A consumer buying the latest iPhone can leverage the convenience of Apple's cloud to automatically back up the phone's content or stream movies on a television connected to an Apple TV device.

This interplay between Apple's products and services increases a consumer's reliance on both, bolstering Apple's revenue through subscriptions between product purchases. This ecosystem will continue to expand, both through acquisitions -- for which Apple has purchased around 100 companies over the past few years -- and in-house research and development (R&D) efforts.

The company's relentless quest to strengthen its technology is one reason why Apple invests heavily in R&D, which represented about half of the company's operating expenses in fiscal Q2, and keeps so much cash on hand. The company exited fiscal Q2 with $28.1 billion in cash and equivalents.

Despite its strengths, Apple isn't immune to macroeconomic factors. Investors should expect some pain in the short term. Apple's fiscal third quarter could show a revenue hit due to the strong U.S. dollar since more than half its net sales come from outside the Americas.

But investors with an eye on the long term can wait for these macroeconomic storms to pass and, while waiting, can collect dividends from Apple stock. The dividend yield is a modest 0.65% at the time of writing, but many tech stocks offer no dividends.

So while inflation, supply chain woes, and other macroeconomic factors may create a daunting picture in the near term, investors holding shares for the long run will be glad they picked up Apple stock.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 3 reasons why Apple stock is a buy appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The author Robert Izquierdo has positions in Apple and Meta Platforms, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple and Berkshire Hathaway (B shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple and Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

AT&T (NYSE: T) took on Netflix (NASDAQ: NFLX) and other video streaming rivals with the launch of its HBO Max service last year. But any comparison between Netflix and AT&T requires a look into how AT&T's streaming service fits into its larger telecom business.

Through this lens, is AT&T a better stock buy than Netflix? Here's how the telecom titan stacks up against the streaming entertainment pioneer.

AT&T's strategy

Despite HBO Max, AT&T's key competitors aren't the likes of Netflix; they're telecom rivals like Verizon Communications.

With the U.S. telecommunications market at a saturation point, AT&T and its competitors are forced to snatch customers from one another to grow subscribers. Holding on to its customers is AT&T's top priority, and as CEO John Stankey said, "HBO Max is the key here."

By bundling telecom services with HBO Max, AT&T hopes to retain customers while enabling the company to capture a higher average subscription price. To this end, AT&T shook up the entertainment industry last December by announcing plans to release its WarnerMedia-produced theatrical film slate to HBO Max at the same time it releases them to theaters in 2021.

Its fourth-quarter results suggest the strategy is having an impact. AT&T experienced growth in postpaid subscribers, the telecom industry's most valued customers, for the second quarter in a row. AT&T added 1.2 million postpaid customers, the highest net adds in some time.

 

Data source: AT&T. 

It combined this growth with the second-lowest quarter of postpaid phone churn in the company's history. It also doubled the number of fourth-quarter HBO Max subscriptions over the previous quarter.

But despite these promising trends, AT&T has struggled since the pandemic struck. The company's 2020 full-year revenue dropped to $171.8 billion from 2019's $181.2 billion.

The diminished revenue hurt the company's efforts to pay down a massive debt load accumulated to acquire Time Warner (which included HBO) and DIRECTV. The latter is like an anchor dragging on AT&T's operations as the service bleeds subscribers.

The financial impact was perhaps most apparent when the company failed to raise its dividend in 2020 after 36 consecutive years of dividend increases. Its high-yield dividend is one of the key reasons investors are attracted to the stock.

Netflix's success

Netflix helped pioneer streaming video entertainment, allowing it to ride a rocket ship of revenue growth spanning years.

Data by YCharts.

The trend continued through the company's most recent quarter. Netflix enjoyed a strong fourth quarter, with paid subscription memberships rising 21.9% year over year.

The company anticipates continued membership growth in the first quarter, rising to 209.7 million subscribers from the previous quarter's 203.7 million. Netflix also expects first-quarter revenue to reach $7.1 billion, up 23.6% from last year.

Membership growth was helped by pandemic-induced stay-at-home restrictions, but when you dig into the numbers, it's also the result of a successful strategy. Netflix invested in content attractive to an international audience. The company developed original programming in German, Korean, Spanish, and other languages.

As a result, Netflix's member growth was powered by international adoption. Of its 2020 net additional memberships, 83% came from markets outside North America. Even better, these local titles also possess global appeal. Its French-language heist series Lupin was a hit around the world, ranking second in Netflix's top 10 in the U.S.

This strategy bodes well for its ability to continue capturing subscriber growth and revenue. Moreover, CFO Spencer Neumann indicated the company turned a corner and expects to break even on a cash flow basis this year and be cash flow positive from 2022 onward.

Despite the successful strategy, Netflix lost market share as more competitors entered the fray. As co-CEO and chief content officer Ted Sarandos says, people have tremendous appetites for great entertainment and are willing to pay for more than one streaming service to get the content they want.

The final verdict

At this point, Netflix is the better buy. Its consistent revenue and subscriber growth, steady path toward being cash flow positive next year, and resilience in the face of fierce competition are all factors making it a justified part of the FAANG gang.

AT&T, meanwhile, must spend years reducing its debt. This and its substantial dividend payouts, totaling nearly $15 billion in 2020, hamper the company's ability to invest in its business.

So for now, Netflix is the clear winner in this comparison.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Better Buy: Netflix vs. AT&T appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

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Robert Izquierdo owns shares of AT&T. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Netflix. The Motley Fool Australia has recommended Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.