Technology stocks have fallen sharply, with the Nasdaq-100 technology sector fell 10% in just five days. Recession fears sparked a major sell-off in which seven of the most valuable technology companies lost a combined $1 trillion in market value on August 5.

Therefore, now is an excellent time to expand your portfolio with companies active in lucrative areas such as artificial intelligence (AI). Despite the market decline, AI remains a sector with enormous growth potential. Data from Grand View Research shows that the market reached $197 billion last year. However, by the end of the decade, this figure is expected to reach almost $2 trillion, growing at an average annual rate of 37%.

When it comes to the companies that make up a large portion of the industry, it’s hard to go wrong with chip stocks. NVIDIA (NVDA -0.21%) And Intel (INTC -3.81%) are attractive options, especially after a sell-off. Nvidia develops the chips used by most AI developers. Intel is building the world’s largest AI chip factory in Ohio to regain its position as a leading manufacturer.

So let’s take a closer look at the operations of these chipmakers and determine whether Nvidia or Intel is the better AI stock to invest in.

NVIDIA

Nvidia stock has fallen 10% since July 30 as Wall Street has been bearish on technology stocks. However, past trends suggest the company won’t be down for long, and it could be worth buying on the dip.

The company’s shares plunged 50% in 2022 amid an economic downturn fueled by significant spikes in inflation and reduced spending in several markets. But macroeconomic improvements and a boom in AI have since sent the share price soaring 586%, alongside rising profits.

Data from YCharts.

Nvidia’s revenue, operating profit, and free cash flow have all reached new highs over the past year, making the recent sell-off look like an overreaction. The current economic situation is fundamentally different from that of 2022, or even from that of 2008. Many technology companies are growing and have posted multiple quarters of encouraging results.

Meanwhile, Nvidia is at the top of its AI game, responsible for 80% of AI graphics processing units (GPUs), and has an industry lead over rivals such as AMD and Intel, which has helped the company build its brand strength. Millions of developers have become so accustomed to Nvidia’s CUDA development software that accompanies its AI GPUs that many are hesitant to switch to a competing product.

As a result, the company was able to maintain its dominance in the AI ​​space even as its competitors launched similar products at lower prices. With solid earnings and a significant market share, Nvidia is an attractive investment after a sell-off.

Intel

Intel’s share price has plunged 34 percent in the past five days, the worst drop in decades. The losses were triggered by economic fears and exacerbated by poor quarterly results.

The company released its second-quarter results on August 1. Revenue fell 1% year-over-year and missed forecasts by $150 million. At the same time, earnings per share fell $0.08 short of expectations at $0.02.

The weak earnings reflect Intel’s heavy investment in restructuring, shifting to a foundry model and placing greater emphasis on AI. The company is focused on the big picture and long-term gains and suggests investors should too.

Since last year, Intel has made some big changes, unveiling several new AI-enabled chips and starting construction on the first of at least four chip factories in the U.S. None of these endeavors are cheap, as its second-quarter losses show, but they could pay off in the next five to 10 years.

CEO Pat Gelsinger said in a recent conference call that increased production of its AI-enabled Core Ultra PC chips contributed to the poor earnings, but he added that “AI PC will grow from less than 10% of the market today to over 50% in 2026,” suggesting those losses will likely be offset.

The company is taking a similar approach to manufacturing. Intel has invested billions in opening chip factories across the U.S. to become the country’s leading AI chipmaker. That will take some time, but it could be worth buying the stock cheap now to hold it for the long term.

Is Nvidia or Intel the better AI stock in 2024?

Nvidia and Intel are at completely different stages in their journey into artificial intelligence. One of them dominates the industry, while the other is yet to see a return on its investment.

Data from YCharts; P/E = Price-Earnings Ratio.

Given their valuations, neither is a huge bargain. But Nvidia’s stock is a better deal with its lower price-to-earnings (P/E) ratio. At the same time, its P/E ratio is close to its 10-year average for that metric, while Intel’s is well above it.

Intel could be a smart investment long-term, but its dismal earnings and high valuation make Nvidia a more attractive buy right now. Nvidia has an established position in the AI ​​space and consistent earnings, making it too good to pass up.