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Forget Nvidia: Consider These 2 Millionaire-Maker Stocks to Buy Instead

Motley Fool - Wed Apr 17, 7:05AM CDT

Nvidia(NASDAQ: NVDA) has made a lot of millionaires over the last year as its share price skyrocketed 225%. The company rallied investors as it became the poster child for a boom in artificial intelligence (AI), snapping up an estimated 90% market share in AI chips.

NVDA PE Ratio (Forward) Chart

Data by YCharts

However, the chart above shows that Nvidia's meteoric rise has made it an expensive option compared to other tech stocks. Nvidia's forward price-to-earnings (P/E) ratio and price-to-sales (P/S) ratio are significantly higher than the same metrics for Intel(NASDAQ: INTC) and Apple(NASDAQ: AAPL).

Forward P/E is calculated by dividing a company's current share price by its estimated future earnings per share. Meanwhile, P/S divides its market cap by its trailing-12-month revenue. These are useful valuation metrics as they consider a company's financial health alongside its share price.

For both, the lower the figure, the better the value. As a result, Intel and Apple are trading at a bargain compared to Nvidia.

So, forget Nvidia and consider these two millionaire-maker stocks instead.

1. Intel

Shares in Intel have risen more than 135% since it went public in 1971, creating plenty of millionaires along the way.

However, the company has hit a few roadblocks in recent years. Its stock is down about 45% over the past three years after seeing decreased market share in central processing units (CPUs) and the end of a partnership with Apple that lasted more than decade.

Intel responded to recent headwinds by introducing significant structural changes that could pay off in the coming years. Last June, Intel announced a "fundamental shift" to its business, adopting an internal foundry model that it believes will help it save $10 billion by 2025. This would see it adopt a model similar to Taiwan Semiconductor Manufacturing, becoming a major provider of foundry capacity in North America and Europe.

Moreover, Intel is moving into AI, a market valued at about $200 billion last year and projected to hit nearly $2 trillion by 2030.

In December 2023, the company debuted a range of AI chips, including Gaudi 3, a graphics processing unit (GPU) designed to challenge similar offerings from market leader Nvidia. Intel also showed off new Core Ultra processors and Xeon server chips, which include neural processing units for running AI programs more efficiently.

Intel's forward P/E of 26 makes it one of the best-valued AI chip stocks right now, with Nvidia's at 35 and AMD's even higher at 45. As a result, the company's stock is a lower-risk way to invest in the AI chip industry and an excellent option to hold over the long term.

2. Apple

Apple's stock has a long reputation for providing investors with consistent and significant gains. In fact, Warren Buffett's holdings company, Berkshire Hathaway, has dedicated 43% of its portfolio to Apple. Meanwhile, the iPhone company's shares have soared 571% since Berkshire first invested in 2016.

Apple has made many millionaires in its time, and it's unlikely to stop as the company continues to dominate consumer tech and expand into budding sectors like AI.

Shares in Apple popped 4% on April 11, marking its best performance in almost a year. The rally came after a Bloomberg report revealed the company will overhaul its Mac computer lineup to center around AI capabilities.

Apple dominates consumer tech, with leading market shares in most of its product categories. Immense brand loyalty from consumers could see the company become a major growth driver in the public's adoption of AI, allowing Apple to carve out a lucrative position in the market. As a result, news that future products will place a stronger focus on the generative technology is promising.

AAPL Free Cash Flow Chart

Data by YCharts

Moreover, despite recent headwinds, Apple achieved $107 billion in free cash flow last year, significantly more than rivals like Microsoft, Amazon, or Alphabet. The figure indicates Apple has the financial resources to continue investing in its business and overcome potential headwinds.

With significant cash resources, an expanding position in AI, and a comparatively low forward P/E, Apple's stock is worth considering over Nvidia right now.

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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. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Berkshire Hathaway, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.

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