Nvidia vs AMD: Smarter AI Chip Stock in the Groq Era?

Published Date : 28/09/2025 

Groq, a Silicon Valley startup, is raising $750 million to develop AI inference chips, challenging the dominance of Nvidia and AMD in the AI semiconductor market. This article explores the implications for investors. 

Over the last few years, investors have witnessed an unprecedented surge in capital expenditures by big tech companies, which are continuing to pour funds into building out their artificial intelligence (AI) infrastructure. Much of that money has been spent on graphics processing units (GPUs) from Nvidia and Advanced Micro Devices, as well as networking gear and custom application-specific integrated circuits (ASICs) from Broadcom.

The tide is beginning to shift, however. Capital is beginning to move further downstream, where a handful of Silicon Valley startups are no longer just attracting curiosity—they are disrupting a semiconductor market long dominated by the current incumbents.

Enter Groq, fresh off a $750 million capital raise that values the company at $6.9 billion. Beyond the headline figure, what stands out is its investor roster, which includes Samsung, Cisco, and BlackRock. This funding round represents a pivotal moment in the broader semiconductor narrative—one that could rewrite the dynamics between the newcomers and legacy giants.

What is Groq, and Why Should Investors Pay Attention?

Nvidia and AMD both design GPUs—hardware that is particularly well suited to powering the training of generative AI models. Groq, however, is pioneering a different path with a chip category known as language processing units (LPUs). Unlike GPUs, LPUs are built for inference—the stage at which trained models are deployed in real-world applications.

This distinction matters because inference requires chips with faster processing speeds, greater power efficiency, and ultra-low latency compared to what GPUs currently deliver. Groq's approach highlights the fact that semiconductors are not one-size-fits-all products, and that AI infrastructure providers will need to look beyond the GPUs they are currently hoarding.

Groq's impressive funding round signals that investors are betting that it can carve out a space in the chip realm by offering viable alternatives optimized for the next wave of AI development.

How Does Groq Impact Nvidia and AMD?

Nvidia today commands an estimated 90% share of the AI accelerator market. That dominance stems from its leading GPU architectures and the deep integration of its CUDA software ecosystem. Together, those have given it a wide moat in its part of the chip space.

Even so, Groq's rise underscores the fact that AI workloads are becoming more fragmented and specialized. If cloud hyperscalers like Microsoft, Amazon, Alphabet, and Oracle determine that Groq's chips are better suited for inference, Nvidia could be forced to defend its position more aggressively—or risk ceding ground in certain high-value corners of the AI landscape.

Throughout the AI revolution, AMD's main pitch against Nvidia has been its ability to deliver lower-cost alternatives. But Groq's emergence could swiftly reshape that narrative. If enterprises begin diversifying into multivendor platforms rather than relying solely on Nvidia's stack, AMD could benefit too. In effect, Groq's rise does not merely challenge Nvidia; rather, it broadens the playing field and gives buyers more leverage. Such moves could propel AMD into the spotlight.

Nvidia vs. AMD: Which Stock Is the Smarter Buy Right Now?

Groq's $750 million equity raise proves that the AI chip race is far from settled. However, Nvidia certainly hasn't been dethroned just yet. Its record levels of profitability give it unmatched financial strength—and plenty of resources it can tap in its efforts to out-innovate smaller rivals. With its current growth trajectory, robust margins, and next-generation chips like Blackwell Ultra and Rubin on the horizon, Nvidia's leadership position still appears durable.

By contrast, AMD is a higher-risk bet. While sales of its MI300 chips are gaining traction, AMD ultimately lacks the ecosystem lock-in that underpins Nvidia's dominance. While Groq's emergence as a chip supplier could help open doors for AMD, it is unclear how much ground it can gain in its efforts to close the gap between itself and the undisputed segment leader.

AMD may capture some incremental upside as a complementary chip provider, but Nvidia continues to be the smarter buy and perhaps the most direct way to profit from the ongoing secular tailwinds fueling the AI infrastructure boom.

Should You Invest $1,000 in Nvidia Right Now?

Before you buy stock in Nvidia, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now—and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $651,593! Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,089,215! Now, it’s worth noting Stock Advisor’s total average return is 1,058%—a market-crushing outperformance compared to 188% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor. 

Frequently Asked Questions (FAQS): 

Q: What is Groq and what does it do?

A: Groq is a Silicon Valley startup that is developing language processing units (LPUs) optimized for AI inference workloads. Unlike GPUs, LPUs are designed for faster processing speeds, greater power efficiency, and ultra-low latency.

Q: How does Groq's technology differ from Nvidia's and AMD's?

A: Groq's LPUs are specifically designed for inference, the stage at which trained AI models are deployed in real-world applications. In contrast, Nvidia and AMD's GPUs are optimized for training generative AI models.

Q: What impact does Groq's rise have on Nvidia and AMD?

A: Groq's rise challenges Nvidia's dominance in the AI accelerator market and broadens the playing field, potentially giving AMD more leverage as a complementary chip provider. It highlights the need for specialized chips beyond GPUs for different AI workloads.

Q: Which stock is the smarter buy: Nvidia or AMD?

A: Nvidia remains the smarter buy due to its robust financial strength, ecosystem lock-in, and leadership in the AI chip market. While AMD is a higher-risk bet, it may benefit from the diversification into multivendor platforms driven by Groq's emergence.

Q: What should investors consider before investing in Nvidia?

A: Investors should consider the broader market dynamics, including the emergence of new players like Groq, and the potential for diversified AI chip solutions. While Nvidia is a strong leader, investors should also look at the overall tech landscape and long-term trends. 

More Related Topics :