The stock market has seen impressive gains from both Nvidia and Arm Holdings in 2024, thanks to the AI semiconductor boom. While both companies are benefiting from the growing demand for AI chips, Nvidia appears to be a more attractive investment option at the moment. Nvidia's dominance in the AI chip market has resulted in significant revenue and earnings growth. With $60. 9 billion in revenue and a 126% increase over the previous year, the company's strong performance is driven by its pricing power and customer demand for its AI processors. Analysts expect Nvidia to continue its growth trajectory, with estimates indicating a jump in data center revenue to $280 billion by 2027. As Nvidia currently holds more than 90% of the lucrative AI chip market, it is well-positioned to capitalize on the sector's expected annual revenue of over $300 billion by the end of the decade. On the other hand, Arm Holdings licenses its intellectual property (IP), software tools, and architecture to chipmakers involved in developing and manufacturing various types of processors.

The demand for these chips, including central processing units (CPUs), neural processing units (NPUs), and graphics processing units (GPUs), is increasing due to the growing adoption of AI servers, PCs, and smartphones. Arm's revenue pipeline has improved significantly, with a 38% increase in remaining performance obligations (RPO) in fiscal Q3. While analysts have raised revenue growth projections for Arm, Nvidia remains the preferred choice for investors. Nvidia's stock is more attractively valued compared to Arm, with a lower sales multiple and trailing and forward earnings multiples. Furthermore, Nvidia's growth rate surpasses that of Arm, making it a better investment option considering its stronger growth and more affordable valuation.