Nvidia vs. Chipotle: Which Stock Split Stock is Better to Buy Now and Hold for the Next 10 Years?

Two of the hottest stocks so far in 2024 are: Chipotle Mexican Grill (CMG 0.76%) and nvidia (NVDA -0.79%). In fact, both companies are considered leaders in their industries.

But in addition to solid business performance, the two companies share another commonality that powers their purchasing activities. Notably, both Nvidia and Chipotle have stock splits scheduled for June.

As each company’s stock price continues to soar, investors may struggle to decide which company represents a more attractive position for the long term.

Let’s break down the benefits and opportunity costs of owning each stock and evaluate which stock is the better choice.

Lawsuits for and against Nvidia

The chart below shows Nvidia’s revenue, gross profit, and net profit over the past 10 years. Clearly, the past few years have seen tremendous growth compared to previous periods.

NVDA Revenue (Quarterly) Data from YCharts

It’s no secret that Nvidia is a major player in the artificial intelligence (AI) space. The company’s H100, A100, and Blackwell graphics processing units (GPUs) are in high demand from customers such as: tesla and meta platform.

What’s really notable about the trends above is that Nvidia’s growth is accelerating both top and bottom lines. Generating excess cash flow will allow Nvidia to reinvest profits into other growth drivers and strengthen its long-term roadmap.

While this is all positive, there are also some risks that need to be acknowledged. Currently, NVIDIA is estimated to occupy 80% of the AI ​​chip market.

However, as competition intensifies intel, advanced micro devicesThere are even large technology companies such as: Amazon Existing customers like Meta pose a threat. Each of these companies is developing its own line of chips, which could eventually erode Nvidia’s lead.

Image source: Getty Images.

Lawsuits for and against Chipotle

Chipotle is best known for its delicious burrito wraps and bowls. With 40 million rewards members, Chipotle has undoubtedly built a loyal following with strong brand equity.

One of the ways Chipotle has been able to capture the attention of many consumers is because of the company’s investment in its digital sales strategy.

CMG Revenue (Quarterly) Data by YCharts

Like Nvidia, Chipotle has been able to finance very profitable operations. Digital sales channels helped drive meaningful margin expansion, which ultimately translated into bottom lines. While these financial results are encouraging, Chipotle stock does carry some risks.

Macroeconomic factors such as inflation and interest rates can affect almost any business. While Nvidia is certainly not immune to these factors, we believe restaurant chains like Chipotle are more vulnerable.

Consumer discretionary trends are very sensitive and can fluctuate from year to year. I would encourage investors to think about these dynamics as they relate to long-term growth prospects.

And who wins?

The final part of this analysis concerns valuation. As you can see in the chart below, the price-to-earnings (P/E) ratios of Chipotle and Nvidia show significantly different trends.

CMG PE Ratio Data from YCharts

In the past year, Chipotle’s P/E has risen significantly and currently sits at 65.7. In contrast, Nvidia’s P/E is much lower than it was a year ago.

Another way to look at this is to understand that while each stock has risen sharply in the last year, Nvidia’s stock is technically cheaper than it was 12 months ago. why? That’s because the company’s profit growth is outpacing its stock price growth.

At the end of the day, Chipotle and Nvidia are two very different businesses.

The fact of the matter is that Chipotle’s fast casual dining is a luxury purchase. While the above operating results indicate that the company can grow, it is important to remember that Chipotle sells burritos. Strictly speaking, this is not a proprietary business.

Nvidia, by contrast, sells products that businesses of all sizes need. And while there is competition, I think there are stronger longer-term secular tailwinds driving AI as opposed to the food industry. If anything, Chipotle could become a customer of Nvidia as the company doubles down on its technology investments.

In other words, AI is so versatile that it can be applied to a variety of industries, including food and beverage. But I don’t think the opposite is true. There isn’t much reason for Nvidia to be a Chipotle customer.

Considering the growth story surrounding AI and Nvidia’s attractive valuation, we believe this company is a better choice compared to Chipotle.