Best AI Stock That’s Not Nvidia?
While the buzz around Artificial Intelligence (AI) has recently centered around companies like Nvidia, which boasts a trillion-dollar market cap, investors may be overlooking a potential gem in the tech landscape—NXP Semiconductors (NASDAQ: NXPI).
Despite its more modest market performance, NXP brings a unique approach to AI that could make it an intriguing investment opportunity. And with 23% upside potential to fair value by our calculations versus 13% downside risk for Nvidia, now might be the time to consider it for your portfolio.
Key Points
- NXP Semiconductors offers a unique and diverse portfolio in the AI market, ranging from automotive AI chips to microcontrollers, making it a compelling alternative to more hyped stocks like Nvidia.
- Despite more modest stock performance, NXP has shown consistent growth, beating analyst expectations for sales and earnings.
- Analysts are largely bullish on NXP’s future, with a consensus target price of $233 per share.
Automotive AI Chips Are Just the Start
Contrary to what its stock performance might suggest, NXP is anything but a bystander in the AI arena. Known primarily for its automotive chips, which make up over half its revenues, NXP also has exposure to self-driving cars and machine learning systems. In short, it’s an AI play too.
Beyond automotive applications, NXP’s microcontrollers are commonly used to process real-time data in various industrial contexts as well as in smart homes.
Have you ever wondered if you closed the garage or left the oven on? NXP’s microcontrollers and machine learning platforms are poised to tackle these everyday concerns by making homes smarter. They help to simplify control over various home applications, like setting temperature controls in order to enhance consumer convenience and energy efficiency.
Undervalued, But Not Underperforming
NXP’s stock may not have seen the meteoric rise that Nvidia has enjoyed, but that could be more of an opportunity than a drawback. The stock is up a mere 26% this year versus 190% for Nvidia.
While the company’s revenue growth has plateaued recently, it has consistently beaten analysts expectations for sales and earnings. It’s also worth mentioning that NXP’s valuation metrics are markedly lower than Nvidia’s.
The former is valued at under 4 times sales compared to Nvidia’s stratospheric 31.9 times sales. In other words, NXP offers an alternative for investors interested in the AI space to the premium multiples Nvidia garners.
A Look Ahead for NXP
NXP is well-positioned to reignite its growth engine and analysts are largely bullish with the consensus target sitting at $233 per share based on the assessment that its AI technology is still under-represented.
Despite AI being a crowded field, NXP’s diversified involvement in everything from self-driving cars to smart homes provides it with multiple lanes to grow.
Final Thoughts
In the scramble to identify the next big thing in AI stocks, NXP Semiconductors stands out as a rare play that has upside to fair value.
Its wide-reaching impact on multiple high-growth markets, coupled with its undervaluation, suggests that this stock could offer both short-term gains and long-term stability.
While the flashier names in the tech industry might be grabbing headlines, don’t overlook NXP—a company that could very well be the stealth powerhouse of the AI era.
