There’s no doubt about it. It’s been a great year to invest in Nvidia (NASDAQ:NVDA), the most magnificent of the “Magnificent Seven” companies. However, Nvidia isn’t the only artificial intelligence (AI) processor arms race competitor. Indeed, a comeback contender in the AI chip industry should make eager NVDA stock buyers think twice.                      

Don’t get the wrong idea. It’s fine to hold Nvidia stock if you already have it. At the same time, an overenthusiastic market may have assigned too much value to Nvidia. Hence, it’s fine to be bullish about Nvidia for the long run, but there are issues to consider in 2024.              

Will NVDA Stock Reach $700 Next Year?

For TD Cowen analyst Matthew Ramsay, investing in Nvidia now is a no-brainer. He assigned Nvidia stock an “outperform” rating and a $700 price target.

Furthermore, Ramsay called NVDA stock his “Best Idea for 2024.” He declared that Nvidia is the “leader in the most consequential growth vector of computing arguably ever (and certainly since the advent of the Internet).” Ramsay feels this way even though the Joseph Biden administration imposed restrictions on Nvidia’s exports of certain AI processors to China.

It feels like Ramsay is typical of analysts and investors nowadays, who assume that Nvidia and its stock can expand rapidly in 2024 because they did in 2023. Yet, rapid expansion can only continue for so long as Nvidia’s GAAP trailing 12-month price-to-earnings (P/E) ratio stands at 63.35x.

As a basis of comparison, the sector median P/E ratio is 26.56x. Nvidia is a powerful company, but the market already knows this and appears to have priced Nvidia’s assumed future growth into the share price.

Nvidia Has a Notable Competitor for 2024

Furthermore, Nvidia will have to vigorously defend its turf in the AI processor market next year. That won’t be easy, especially with a formerly reviled competitor making a swift comeback.

I’m referring to Intel (NASDAQ:INTC), which recently made a big splash at its AI Everywhere event. That’s when Intel unveiled three different configurations of its new Core Ultra processors for laptops.

Intel also featured its 5th Gen Intel Xeon processors at that same event. According to Sandra Rivera, executive vice president of Intel’s Data Center and AI Group, the 5th Gen Intel Xeon processors are “[d]esigned for AI” and “provide greater performance to customers deploying AI capabilities across cloud, network, and edge use cases.”

Perhaps most importantly, Intel revealed its Gaudi 3 AI accelerators. These chips will compete with Nvidia’s H100 model, and according to Bloomberg, Intel said that the Gaude 3 AI accelerators “will outperform the H100.”

Nvidia Stock: Choose Judgment Over Enthusiasm

Nvidia has strong growth prospects, but the company’s expansion may have already been priced into Nvidia stock. Consequently, it shouldn’t be too surprising if the stock doesn’t repeat 2023’s performance next year.

Be prepared for NVDA stock to go sideways for a while before the next leg up. It’s fine to hold whatever Nvidia shares you may already have. However, there shouldn’t be any hurry to add to your position. Just allow yourself to watch and wait in early 2024, and see if Intel poses a major threat to Nvidia’s business.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.