Nvidia can’t stop stunning Wall Street and the investing community in 2023, but portfolio managers say don’t let the excitement overshadow other potential AI winners. In the span of nine months Nvidia’s stock has surged 232%, hit all-time highs and garnered bullish attention from the biggest investment shops on Wall Street, all while topping a $1 trillion market cap and shocking the world with two consecutive blowout AI-fueled quarters. “Theme after theme, transition after transition, the strong usually gets stronger,” said Paul Meeks, portfolio manager at Independent Solutions Wealth Management. But, “you’re always going to find some company that comes out of nowhere.” Nvidia’s quarterly report seemed to leave some investors questioning whether any serious challenger can challenge its well-protected throne, or catch up to speed building comparable chips able to power generative AI models. And the price action seemed to suggest a rotation out of those popular names. On Aug. 24 — the day after Nvidia reported another blockbuster quarter — Intel , Advanced Micro Devices , Broadcom and Marvell Technology shed 4%, 7%, 2.5% and 6.9%, respectively. Nvidia eked out a small gain amid a broad market sell-off that day. NVDA YTD mountain Nvidia shares have more than doubled in 2023 Until someone can develop something cheaper and as effective, investors and portfolio managers say it’s hard to pinpoint who that clear competitor might be, but Nvidia won’t be the only game in town forever, and investors should avoid overlooking the other budding AI players on the horizon. “I don’t see any obvious competitors, but there’s always this thing called the new where somebody goes, ‘Hey, let’s do it this way instead,'” said Kim Forrest of Bokeh Capital Partners. “It completely sweeps the rug out from underneath somebody else and this is just the area that they do it in.” The strong get stronger Last month, Nvidia did the unthinkable when it topped quarterly expectations for the second straight period and issued strong guidance for the current period nearly well above analyst expectations. Despite another groundbreaking quarter, the stock finished marginally higher, while peers sold off. Some retail and professional investors seemed to interpret the news as a sign that it’s “game over” for some of the other AI chipmakers, Forrest said. And, while Nvidia definitely took the steam out of some other players, it’s hard to regard the print as bad news for the rest of the market this soon in the fight. “I think it’s a little early to call that but I can see a lot of investors deciding to lighten up their other semiconductor holdings in favor of Nvidia thinking the strong are only gonna get stronger,” she said. Forrest, who’s on the hunt for growth at a reasonable price, points to companies like Advanced Micro Devices, Micron Technology . At this point, Forrest is mainly searching for software plays poised to benefit. AMD MU YTD mountain AMD and MU in 2023 While Meeks said investors looking to invest behind the AI theme may be better off sticking to pure-play winners like Nvidia, they shouldn’t overlook Advanced Micro Devices — which is slated to roll out a competitive AI chip in the coming months. Many on Wall Street view Advanced Micro Devices as the potential challenger to the throne, but Meeks doesn’t see the company overtaking Nvidia’s dominant position anytime soon. On the AI chip theme, Meeks also points to Broadcom , Marvell Technology and Taiwan Semiconductor , a major supplier for Nvidia, as other ways to play the trend. Shares of Broadcom stock sold off during Friday’s session after the networking equipment chipmaker shared in-line guidance and its CEO sought to temper AI expectations. Advisors Capital Management’s JoAnne Feeney, who owns networking chipmaker Broadcom along with Nvidia and AMD, referred to the comments as an appropriate move to prevent an explosion in its multiple, but there’s no doubt AI factors into its growth story. She also highlighted the company’s partnership with Google on its tensor processing units powering AI. Looking ahead, Feeney said it’s hard to refute the notion that AI will alter the way businesses operate and prove a powerful long-term growth driver for Nvidia and its share price. But how long this major growth phase and blowout guidance pattern lasts remains uncertain, she said. “The stock is already pretty valuable, it’s already incorporating a lot of that growth outlook,” she said. “Let’s just wait and see how much they can deliver over the next few quarters and how much persistence is going to be to this growth over the next few years.”
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