Investing

Best AI Stock to Buy: Nvidia vs. Symbotic

Chris MacDonald

Published: April 10, 2024 12:52 pm

For investors looking for a top AI stock to buy, Nvidia (Nasdaq: NVDA) and Symbotic (Nasdaq: SYM) are two top options that often come to mind. As the world’s third-largest company, and the primary beneficiary of the AI surge, it’s no surprise to see Nvidia remain a key focal point for so many investors. We’re going to need a bunch of chips to power the artificial intelligence revolution that’s unfolding in front of our eyes. Nvidia just happens to have the best high-performance chips in the market, making it a top picks-and-shovels play in this space.

Symbotic is a company that’s looking to revolutionize the robotics space, integrating AI into its core business model which revolves around creating efficiencies in modern warehouses. Using AI to train and program robots to complete tasks that used to be accomplished by humans provides companies with the sort of efficiency boost they all seem to be after right now. And with a stock price that’s been trading relatively rangebound over the past year, it’s a stock that hasn’t gotten outlandishly expensive.

So, which is the best bet in this market of improving sentiment among so many AI names? Here’s our take. 

Nvidia: The Way to Gain the Broadest Exposure to the AI Trend

Source: nvidianews.nvidia.com

Nvidia’s existing market share in the world of high-performance chips is staggering. A market share of around 80% in the high-performance semiconductors that actually matter positions Nvidia for incredible growth as the overall pie continues to expand. Of course, expecting that Nvidia can hold this market share lead will depend on the company’s ability to continue to ramp up production over time. But it’s clear that there’s no shortage of demand for the chips Nvidia continues to roll out.

On that note, the company’s recent GTC event brought about the unveiling of its newest B200 chip and its Blackwell platform, which the company hopes will usher in a new era of computing. The specs on these innovative technologies are astounding, and it’s clear that at least in terms of performance, the gap between Nvidia and its rivals is only growing.

Combine this fact with other technical factors, including strong options demand and a potential stock split, and there’s plenty of reasons for investors to remain bullish on NVDA stock right now.

Of course, the ability and willingness of companies to spend up to $40,000 on one chip remains strong right now. That may change, as market dynamics shift. But again, the best way to play a gold rush of sorts is to sell the picks and shovels for prospectors to go and do their thing – Nvidia does just that.

Symbotic: More than a Pure-Play AI Stock

Source: onurdongel / E+ via Getty Images

Symbotic’s chart since going public in 2021 is rather incredible. In late-2021, the company went public via a SPAC merger. However, unlike so many de-SPAC stocks that have plunged since their initial offerings, SYM stock has surged from $10.54 on its first day of trading to more than $45 at the time of writing. That’s good for an increase of nearly 350% in the span of a little more than two years. 

Unlike other high-growth tech stocks that have seen their valuations peak and plunge in the incredible year that was 2021, Symbotic largely missed that fallout. The company went public and what is likely going to turn out to be the best possible time, capturing a wave of interest in AI-enabled technology for supply chains.

Symbotic’s focus on modernizing the global supply chain is an altruistic one, but is also one that’s proven to be highly profitable. The company hopes to continue to expand its margins and produce positive net earnings in short order, and if it does so, this is a stock that fundamental value investors may start to jump on. A valuation of around $26 billion for a company with this much upside is certainly intriguing enough to growth investors. If the company gains even greater traction in the global markets it’s targeting, it’s unclear just how much Symbotic’s revenue growth rate could accelerate.

Better Bet: Nvidia

Source: BING-JHEN HONG / iStock Editorial via Getty Images

It’s my view that Nvidia is more likely the optimal bet for most investors looking at the AI sector. Let’s be clear, both companies are top-notch AI plays. But they’re very different companies in the sense that Nvidia benefits from the overall trend, while Symbotic operates more of a niche business focusing its AI efforts on one area of the economy.

While I think both stocks are likely to continue to outperform so long as sentiment remains where it is right now, I do think Nvidia’s valuation is actually more compelling at these levels. On a price-earnings-to-growth (PEG) basis, NVDA stock is cheap. And while Symbotic may boast a more attractive price-sales multiple, Nvidia’s incredible margins are in a league of their own. These companies are difficult to compare, but I’ll have to stick with the industry leader. At least for now.