Artificial intelligence (AI) has been the hottest trend in the market in recent years, and there are no signs of this trend slowing down. Unlike other trends that have stormed the markets in recent years, AI, and especially generative AI, has unlocked incredible value for users, techies and laymen alike.
Chipmaker Nvidia has received a lot of attention – and attendant stock gains. But other players are also reaping the benefits and have a lot of potential. To consider Dell Technologies (NYSE: DELL) And Amazon (NASDAQ: AMZN). Which AI stock is best to buy today?
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Keith Noonan: Dell has shown strong growth thanks to big gains in the AI server market. While total revenue rose 9% to $25 billion in the last reported quarter, revenue for the infrastructure solutions segment rose 38% to $11.6 billion. Within the segment, server and networking revenue rose 80% to $7.7 billion. There is probably still a lot of growth in the product category.
In addition to its own competitive strengths, Dell is poised to capitalize on the missteps of one of its biggest competitors. Super microcomputer (aka Supermicro) was the hottest player in the high-performance server market, but the company has suffered some seemingly self-inflicted setbacks.
Last month, Supermicro’s accountant resigned, saying he could no longer deal with the company because he could not rely on management’s statements or the company’s financial statements. Supermicro had already postponed the filing of its annual 10-K report with the Securities and Exchange Commission (SEC) before its auditor resigned, and subsequently postponed the filing of its 10-Q report for the first quarter of the current fiscal year postponed.
Supermicro’s accounting problems have had a major impact on the company’s reputation and have played a major role in the shares drying up. In the past month alone, the share price has fallen more than 60%. The stumbling blocks also seem likely to have a significant impact on the server specialist’s business performance and competitive position.
In response to the controversy and uncertainty, reports emerged that Nvidia had begun diverting orders that would have gone to Super Micro Computer to other companies. Nvidia’s graphics processing units (GPUs) were the core hardware in Supermicro’s most advanced servers. Even more notable, Supermicro was recently ranked as Nvidia’s third largest customer.
Dell now appears poised to take significant market share from Supermicro in the high-performance server market and could be poised to emerge as a market leader. With the dynamics in the AI server niche changing, the stock seems like a smart pick right now.
Jennifer Saibil: Amazon is best known for its unbeatable e-commerce business and less known for its cloud computing segment, Amazon Web Services, even though this company is the top in that market.
However, it is willing to go anywhere it sees an opportunity to create a dominant company. That includes making hardware, and it’s become the go-to place for connected devices like the Alexa digital assistant, Echo smart speakers, and Kindle e-readers. It brings that convergence of digital solutions, AI and hardware to develop a large AI company focused on AWS and generative AI.
Amazon is partnering with Nvidia’s GPUs to offer the most competitive generative AI services for AWS customers, what it calls the bottom tier (of the three) of AI services. These are aimed at developers who code from scratch and create their own large language models (LLMS), which form the basis of generative AI.
The middle tier is for programmers who need semi-custom options and can rely on Amazon’s LLMs, and the top tier is for smaller companies looking for budget options that still deliver excellent results. Based on feedback from its huge customer base, Amazon decided to make its own chips for price-conscious customers, while still working with Nvidia for other customer needs.
In the third quarter earnings report, CEO Andy Jassy said the AI business already has a multi-billion dollar annual run rate, but this is just the beginning. The AI company not only supports coding for programmers, but can also create entire marketing campaigns, including print, video and audio, based on prompts and images.
The excitement and opportunities offered by generative AI are also leading to an upswing in the overall cloud business. Customers have cut back on spending as inflation soars, but they’re realizing they can’t join the generative AI revolution without being in the cloud. Enterprises are switching to AWS services and AWS revenue rose 19% year over year in the third quarter.
Amazon is a leading player in so many areas where AI will play a big role, and it’s an excellent time to invest in this no-brainer stock.
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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. Jennifer Saibil has no positions in any of the stocks mentioned. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has and recommends positions in Amazon and Nvidia. The Motley Fool has a disclosure policy.
Better AI Stocks to Buy Today: Dell Technologies vs. Amazon was originally published by The Motley Fool
