The AI Stock That's Secretly Crushing Nvidia

When most investors think of an artificial intelligence stock, Nvidia (NASDAQ: NVDA) is the name that comes to mind. And understandably so. Not only is the company's technology the heart and soul of most AI data centers, but Nvidia shares have dished out the most widespread gains to the greatest number of shareholders.

Nothing lasts forever, though. As time marches on, other companies catch up with market leaders, delivering outsized gains to their investors. And one artificial intelligence name that's come on strong enough since early last year to outperform Nvidia's stock is Alibaba (NYSE: BABA).

Image source: Getty Images.

Yes, Alibaba

That's not a typo. Although you may best know the company as China's e-commerce powerhouse serving its home country's (and nearby neighbors') consumers, it officially waded into AI waters in late August with the unveiling of its first-ever AI processor chip that's competitive with Nvidia's powerful H2O processors approved for sale to overseas customers.

Although shares were starting to perk up by the middle of last year in anticipation of this move, seeing it become a reality dramatically stoked those bullish fires. Between then and now, Alibaba shares have gained 89% versus Nvidia stock's advance of a more modest 51%. And that's with the recent marketwide weakness undermining Alibaba's recent bullishness.

Data by YCharts.

It's arguably well-deserved bullishness too, as the company and country aim to wean themselves from dependence on Nvidia-made tech.

Settle in

Just keep all of it in perspective. Alibaba is maneuvering to capitalize on an obvious opportunity, but it's still very early days for its artificial intelligence chip business. It could be several years before it achieves enough production scale to add to the company's bottom line rather than subtract from it. Expect plenty of volatility from the stock.

Also keep in mind, however, that stocks tend to move in anticipation of a company's future rather than reflect its past, or even its present. And the more compelling the future, the further down the road the market is willing to look. That's why Alibaba could continue to outperform Nvidia for the foreseeable future.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.