AI Stocks Set to Surpass Nvidia by 2030

Nvidia's Dominance in AI and the Rising Potential of Amazon and Meta

Nvidia has emerged as a major beneficiary of the surge in artificial intelligence (AI) spending among big tech companies. However, other industry leaders such as Amazon and Meta Platforms are also experiencing significant gains from their investments in AI, with promising futures ahead. Both companies currently trade at more attractive valuations compared to Nvidia, which has become quite expensive.

Since October 2022, Nvidia’s value has surged by over $4 trillion, making it one of the most valuable companies in the world. This growth is largely attributed to its chips being used by major tech companies for AI infrastructure. The four largest hyperscalers are expected to spend around $380 billion on AI infrastructure this year, with plans to increase that amount next year.

Despite its impressive growth, it's unlikely that Nvidia will maintain this pace indefinitely. The company faces competition from other chipmakers like AMD, and some of its biggest customers are developing their own custom silicon solutions. For example, Microsoft is planning to shift a significant portion of its spending to its Maia300 chip in late 2026, while Meta is expanding the capabilities of its MTIA chips.

Investors should be aware of the potential slowdown in sales as Nvidia navigates fierce competition and the law of large numbers. As supply-demand forces reach equilibrium, the company may not be able to sustain its high gross margins, which could impact earnings growth. However, the stock currently trades at more than 42 times forward earnings, indicating that investors believe these risks are manageable.

For those looking to invest in big tech companies capitalizing on AI growth, Amazon and Meta Platforms present better value with more upside potential. In fact, it's expected that both companies could surpass Nvidia in value by 2030.

Amazon: A Strong Player in Cloud Computing and AI

Amazon, the largest provider of public cloud computing through Amazon Web Services (AWS), is one of Nvidia's biggest customers. While the company was initially caught off guard by the rise of generative AI in 2022, it quickly adapted with strategic investments, including its partnership with Anthropic.

AWS continues to see strong demand for its AI services, with revenue more than doubling year-over-year. Despite AWS's 17% year-over-year growth, which appears modest compared to Microsoft's 39% growth in cloud services, Amazon has managed to maintain its market share. The cloud segment generated $116 billion in revenue over the last 12 months, significantly outpacing its competitors.

AWS's operating margin is also impressive, with a 36.8% margin over the last 12 months, up from 33.4% a year ago. While there was a dip in the second quarter due to timing of share-based compensation, the long-term trend shows continued improvement in margins.

In addition to AWS, Amazon's retail business is becoming increasingly profitable. The North American segment saw an operating margin of 7%, while the international segment had a margin of 3.4%. Strong top-line growth of 11% for both segments, bolstered by high-margin ad revenue growth of 22%, highlights the company's overall strength.

With steady revenue growth across its businesses and particularly in high-margin operations like AWS and advertising, Amazon is well-positioned for future earnings growth. As spending on AWS slows, free cash flow is expected to rise, providing more opportunities for investment and growth.

Meta Platforms: Leveraging AI for Advertising Growth

Meta Platforms is another major customer of Nvidia, but unlike Amazon, it uses Nvidia chips primarily for its own AI needs. In fact, Meta might be the largest spender on AI infrastructure globally. Its second-quarter results exemplify this, with sales growing by 22% and operating margins expanding by 5 percentage points.

Artificial intelligence has played a key role in Meta's success, leading to better recommendations for advertisements and organic content. This has resulted in more ads being served and higher pricing per ad impression. Additionally, Meta is seeing strong adoption of its generative AI tools for ad creation, making it easier for marketers to develop and test new ideas.

Meta's AI chatbots, integrated into WhatsApp and Messenger, offer new opportunities for monetization through increased click-to-message ads. With 1 billion monthly active users for its Meta AI chatbot, the company has a strong platform for future growth. It recently started showing ads in WhatsApp and Threads, further expanding its monetization potential.

Beyond social media, Meta is also at the forefront of augmented and virtual reality development. AI can unlock significant value in environments that are aware of user surroundings. The company has already seen strong early adoption of its Meta Glasses, which incorporate AI features.

Meta's shares appear attractive, trading at an enterprise value of around 16 times forward EBITDA. While depreciation of its data centers may impact margins, the company is demonstrating strong revenue growth and unlocking long-term profit potential.

Investing in Amazon and Meta offers compelling opportunities for those looking to capitalize on AI-driven growth. With strong fundamentals and favorable long-term trends, both companies are well-positioned to outperform in the coming years.