Nvidia (NASDAQ: NVDA) is officially the largest company in the world by market capitalization. The computer chipmaker that dominates the artificial intelligence (AI) field has grown at an insatiable rate over the last few years, making investors rich in the process.
That does not mean it will repeat over the next few years. Today, Nvidia trades at a premium price-to-earnings (P/E) ratio, faces competition from its own customers, and relies solely on the growth of AI infrastructure spending to keep the party going. This makes the stock a risky bet for investors at its current market cap of $4.6 trillion.
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Is it time to forget Nvidia and buy some other AI stocks instead?
First up is Amazon (NASDAQ: AMZN). The technology giant is one of Nvidia’s largest customers, spending a boatload of money each year on AI-related computer chips for its cloud infrastructure business, Amazon Web Services (AWS).
While Amazon will still remain an Nvidia customer, it has begun diversifying its chip procurement by developing in-house brands. Specifically, AWS is working closely with the fast-growing AI start-up Anthropic to build data centers using these in-house chips, slowly pushing Nvidia out as its preferred chip provider. This will save Amazon money while also potentially producing a headwind for Nvidia over the next few years.
When looking at Amazon’s business, it is doing just fine at the moment. Revenue from North American commerce grew 10% year over year last quarter to $127 billion, while AWS revenue was up 24% year over year to $35.6 billion. This year, Amazon plans to spend $200 billion on capital expenditures, primarily on AWS. This should lead to stronger growth for its AI cloud computing business as start-ups like Anthropic — along with its existing corporate clients — keep pouring billions of dollars into the AI race.
The other major customer-turned-competitor to Nvidia is Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), parent company of Google, YouTube, and Gemini. Alphabet was one of the first big tech companies to invest in its own computer chips, with the in-house Tensor Processing Units (TPUs) now powering a bunch of the business’s internal data center usage and cloud infrastructure.
Like Amazon, Alphabet will remain a customer of Nvidia but could reduce its exposure to the third-party chipmaker over time.
