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AI Giants Amazon and Meta Tipped to Outshine Nvidia by 2030
17 Aug
Summary
- Nvidia's stock trading at over 42 times forward earnings
- Amazon and Meta seen as better value with more upside potential
- Amazon's AWS and Meta's AI capabilities driving strong growth
According to the analysis, Nvidia's stock is currently trading at over 42 times forward earnings, suggesting that investors are not concerned about the risks facing the company. However, the analyst believes these risks are likely to limit Nvidia's ability to continue outperforming the market at such a rapid pace, limiting the potential for further upside.
In contrast, the analyst believes that two industry giants, Amazon and Meta, present better value and more upside potential for investors looking to capitalize on the growth of AI. The analyst expects both companies to be worth more than Nvidia by 2030.
Amazon's Amazon Web Services (AWS) is the largest provider of public cloud computing in the world, making it one of Nvidia's biggest customers. While the company was initially caught off guard by the rise of generative AI in 2022, management quickly caught up with the competition, thanks in part to its investment in Anthropic. AWS's scale has masked the strong growth in its AI services, with revenue more than doubling year-over-year. Additionally, the margin profile of AWS is extremely strong, with an operating margin of 36.8% over the last 12 months.
Meanwhile, Meta is another major Nvidia customer, and it is spending more on its own AI needs than any other company in the world. Meta's second-quarter results demonstrate the benefits of its AI capabilities, with sales growing 22% and its operating margin expanding by 5 percentage points. The company's AI-powered recommendations for advertisements and organic content have led to better performance, and it is also exploring opportunities in AI chatbots and augmented/virtual reality.
The analyst believes that the long-term trends favor steady revenue growth across Amazon's businesses, with particular strength in its high-margin operations, including AWS and advertising. Similarly, Meta's investments in AI are expected to continue driving strong revenue growth and unlocking significant profit potential in the long run.
