Nvidia Stock vs. Arm Stock: Wall Street Says Buy One and Sell the Other

Grand View Research forecasts artificial intelligence (AI) chip sales will grow at 29% annually through 2030. Semiconductor companies Nvidia (NASDAQ: NVDA) and Arm Holdings (NASDAQ: ARM) are major players in that market, and shares have rocketed 166% and 100%, respectivley, year to date. But most Wall Street analysts expect the stocks to move in opposite directions over the next year.

• Nvidia has a median 12-month price target of $150 per share. That implies 15% upside from its current share price of $131.

• Arm has a median 12-month price target of $144 per share. That implies 5% downside from its current share price of $151.

Going forward, Nvidia and Arm should benefit as businesses continue to build out their AI infrastructure, but that does not necessarily make them good investments. Here are the important details.

1. Nvidia

Nvidia holds 98% market share in data center graphics processing units (GPU), chips used to accelerate computationally demanding workloads like training machine learning models and running artificial intelligence (AI) applications. That dominance is more than a decade in the making. In 2006, Nvidia introduced its CUDA programming model, which has evolved into an unmatched ecosystem of software development tools for GPU programmers.

More recently, Nvidia has added networking gear and central processing units (CPUs) to its hardware portfolio, and debuted software and cloud services that simplify AI application development. In that context, while many investors view Nvidia as a chipmaker, it is more accurately an accelerated computing company. And its ability to innovate across the entire data center computing stack -- from hardware to software to services -- affords Nvidia a competitive moat.

Nvidia beat estimates with its financial results in the second quarter of fiscal 2025 (ended July 2024). Revenue increased 122% to $30 billion due to strong demand for AI chips, networking, and enterprise software. And non-GAAP net income increased 152% to $0.68 per diluted share. Management also gave stronger guidance than Wall Street anticipated, such that revenue is forecast to jump 80% in the third quarter.

It goes without saying that Nvidia has a tremendous opportunity where AI is concerned, but the broader data center accelerator market is equally momentous. "We are at the beginning of our journey to modernize $1 trillion worth of data centers from general-purpose computing to accelerated computing," CEO Jensen Huang recently told analysts. He expects that transition to play out over the next four to five years.