Right now, everybody and his uncle is enamored with Nvidia (NASDAQ:NVDA). However, Nvidia isn’t the only chip maker in Silicon Valley. Advanced Micro Devices (NASDAQ:AMD), commonly known as just AMD, also designs powerful chips for artificial intelligence applications. So, even if you’re massively bullish about Nvidia, it’s still an excellent strategy to own some AMD stock.
Of course, the skeptics will disagree. They’ll claim that AMD shares are “richly valued” and need to come down before they’ll be attractive again. This mind-set comes with an enormous opportunity cost, so don’t complain if the AMD train leaves the station and you’re not on board.
AMD Reaches a Market-Cap Milestone
This news is so big that even The Wall Street Journal had to report on it. On the last day of February, AMD surpassed a $300 billion market capitalization.
Barron’s also noted AMD’s market-cap milestone. The critics might say that $300 billion is “just another round number,” but there’s a greater significance here.
It’s a sign that Nvidia’s blockbuster fourth-quarter 2023 earnings results really aren’t just about one company. Truly, these results confirm the idea that AI isn’t just a passing fad.
Or, as Nvidia CEO Jensen Huang put it, “Accelerated computing and generative AI have hit the tipping point. Demand is surging worldwide across companies, industries and nations.”
If you doubted this, just refresh yourself on AMD’s fourth-quarter 2023 financial results. The company’s diluted earnings per share increased 4,000% year over year, believe it or not.
Big-Bank Analysts Are ‘Wildly Bullish’ on Chip Stocks
Huang isn’t the only individual with an optimistic view of the AI-chip market. Reportedly, Citigroup analysts are “wildly bullish on semis” as “the AI market continues to grow.”
Big-bank analysts don’t use that kind of ultra-bullish language every day. As you might expect, the Citigroup analysts identified Nvidia stock as one that they favor among chip stocks. However, they also mentioned AMD stock.
A recent Barron’s report observed that AMD is “widely viewed as offering the one clear alternative to” Nvidia’s graphics processing units. I tend to concur with this assessment.
The point is, don’t be so enamored with Nvidia that you overlook investment opportunities with Nvidia’s rival, AMD. After all, a “wildly bullish” environment for chip stocks won’t only boost Nvidia; it will benefit AMD, as well.
Pair Up Nvidia Stock With AMD Stock
Some of you reading this will undoubtedly hold Nvidia stock, either directly or through an index-tracking fund. There’s nothing wrong with that, but Nvidia has to compete with AMD. So, have you considered owning a equal allocation in both stocks?
It’s a sensible strategy if you’re optimistic about the growth of the AI-hardware market. No, you don’t have to be “wildly bullish” about it. For optimal results, just consider diversifying your portfolio with shares of both Nvidia and AMD.
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.
