AI Investment: Looking Beyond Nvidia to CGI Inc.

JJohn January 18, 2024 7:01 AM

Nvidia's monopoly on the AI chip market is being challenged by new competitors, potentially impacting its high-value stock position. For investors seeking long-term growth in the AI industry, CGI Inc., an AI-focused tech consultancy, may be a more strategic bet, offering steady growth alongside lower risk.

Potential challenges for Nvidia

Nvidia has been the darling of investors in the AI trade, its stock value soaring to make it a member of the trillion-dollar club. However, this high-flying status comes with inherent risks. It's trading at 31 times last year’s sales, and the market anticipates a 55% surge in annual sales. But it's not all rosy: Nvidia was the sole AI chip supplier last year, but now faces competition from the likes of Advanced Micro Devices. Further complicating matters, export restrictions to China and parts of the Middle East may impact more than 20% of Nvidia’s AI-accelerator sales. Additionally, with the lifespan of AI chips being around three years and new upgrades on the horizon, customers may delay purchases, potentially dampening sales in 2024.

CGI Inc.: a safer AI investment option

For investors concerned about the risk-reward tradeoff on Nvidia's volatile stock but still keen to capitalize on the AI market, Canadian firm CGI Inc. offers a compelling alternative. CGI is a leading consultancy for global firms and governments seeking to leverage AI for a range of applications, from process modernization to earnings optimization. It's well-positioned for growth, with a commitment to invest $1 billion in advancing its AI offerings over the next three years. Moreover, the company's track record in AI project consultancy is robust, with customer bookings skyrocketing as the AI trend continues to grow.

CGI's recent successes reinforce its position as an AI growth stock. Notably, the company disclosed in November that it was working on 600 AI projects and had $175 million in new AI bookings. It also recently won a contract to integrate AI into visa processing at U.S. embassies and consulates in the Asia Pacific region. Furthermore, CGI launched 'Machine Vision' in January, a new AI product that promises to revolutionize the monitoring and tracking of corporate assets. These accomplishments speak volumes about CGI's growth potential, suggesting it could be a wise investment as global AI adoption continues to rise.

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