Nvidia (NASDAQ: NVDA) inventory has been on hearth amid the huge demand for its AI chips. That has led to worries of overvaluation amid its 249% acquire during the last 12 months.That may be worrisome, given the current historical past of one other AI inventory, Tesla (NASDAQ: TSLA). Ark Make investments’s Cathie Wooden predicted a $2,000 per share value for Tesla by 2027 on anticipated demand for its self-driving platform. That forecast has occurred as falling demand for EVs and decrease gross margins hamper its inventory, which is down 30% in 2024.Though Nvidia is just not invincible, it has not proven any indicators of slowing up to now. Therefore, earlier than assuming that Nvidia will comply with Tesla’s lead, traders ought to think about these factors.1. Variations between the 2 businessesInvestors ought to keep in mind that it has solely been in recent times that traders seen Nvidia and Tesla as potential rivals. Tesla was lengthy seen as an automaker and a battery firm, and even now, automobile gross sales make up many of the firm’s income.Nevertheless, as talked about earlier than, some analysts paid extra consideration to Tesla’s self-driving platform. On this regard, Tesla has made an uncommon and intriguing resolution. Slightly than turning to Nvidia or Superior Micro Units for the chips to energy the platform, Tesla developed AI chips, software program, and robotics in-house.Nvidia focuses extra closely on AI chips, primarily with information facilities. Though automotive makes up a tiny fraction of its income, its product line consists of three totally different chips tailor-made to driver help and full self-driving. Moreover, it presents software program packages, together with an working system and neural community.Nvidia credited Tesla with “elevating the bar.” One has to imagine Tesla is the trade chief on this area of interest. Nonetheless, Nvidia argues that it presents the one platform on which the auto trade can construct.In reality, each firms have work to do on this space to realize full self-driving. Nonetheless, with Nvidia’s focus within the information middle, it looks as if it’s going to carry out no matter whether or not it might probably develop a aggressive benefit within the auto trade.Story continues2. Results on financialsNot surprisingly, differing focal factors have naturally led to divergent monetary outcomes.In fiscal 2024 (ended Jan. 31), Nvidia’s income of $61 billion surged 126% increased over the earlier yr, resulting in a web earnings of $31 billion, a 581% yearly rise. Given such outcomes, the huge features in Nvidia inventory appear much less stunning.In distinction, Tesla’s decrease margins might have weighed on Tesla’s development price, not less than within the close to time period. In 2023, income grew at an annual price of 19% to $97 billion. That sounds promising till you think about that it delivered 38% extra automobiles, that means that gross margins fell from 26% to 18% throughout that point. Such outcomes might dim the optimism about usually accepted accounting rules (GAAP) web earnings, which rose 19% to $15 billion.3. The combined alerts coming from valuationsDespite Nvidia’s robust monetary efficiency, traders might not know what to make of the differing valuation metrics between the 2 firms.Because of Nvidia’s rising inventory value, the price-to-sales (P/S) ratio elevated to about 37. It is a excessive stage even for an organization experiencing large development, however it seemingly displays the joy boosting the inventory.In distinction, Tesla at present sells at a P/S ratio of 6. This isn’t a report low for Tesla, because the gross sales a number of fell under 2 in 2019, proper earlier than the pandemic. Nonetheless, the P/S ratio is at its lowest stage since 2020, and will lead some traders to query how far more draw back there may be for Tesla inventory.Nonetheless, regardless of Tesla’s current decline, the corporate trades at a ahead P/E ratio of 54 as value cuts and slimmer gross margins start to cut back profitability. Curiously, Nvidia’s fast earnings development interprets right into a ahead P/E ratio of simply 37. Such a a number of might indicate that Nvidia might have a bonus regardless of current features.Finally, traders ought to take each the P/S ratio and ahead P/E ratio into consideration. Nevertheless, since earnings are likely to affect inventory costs extra straight, the metrics appear to position Nvidia in a extra favorable mild than Tesla.Will Nvidia crash like Tesla?Given present situations, Nvidia inventory will in all probability not decline to the identical extent as Tesla anytime quickly. Certainly, competitors and an inevitable downturn within the chip trade may ultimately undermine Nvidia. Nonetheless, with demand so robust for AI chips, such a state of affairs will seemingly not have an effect on Nvidia within the foreseeable future.Tesla faces a extra unsure path. For now, slimmer margins on auto gross sales will strain the corporate. Additionally, it’s unclear when (or if) Tesla’s full self-driving platform will take over all driving features and appeal to prospects. So, whereas Tesla inventory may ultimately come again, traders shouldn’t count on such a restoration within the close to time period.Do you have to make investments $1,000 in Nvidia proper now?Before you purchase inventory in Nvidia, think about this:The Motley Idiot Inventory Advisor analyst crew simply recognized what they consider are the 10 greatest shares for traders to purchase now… and Nvidia wasn’t one in every of them. The ten shares that made the minimize may produce monster returns within the coming years.Inventory Advisor gives traders with an easy-to-follow blueprint for achievement, together with steerage on constructing a portfolio, common updates from analysts, and two new inventory picks every month. The Inventory Advisor service has greater than tripled the return of S&P 500 since 2002*.See the ten shares*Inventory Advisor returns as of March 21, 2024Will Healy has positions in Superior Micro Units. The Motley Idiot has positions in and recommends Superior Micro Units, Nvidia, and Tesla. The Motley Idiot has a disclosure coverage.Will Nvidia Inventory Crash Like Tesla? 3 Factors To Think about was initially revealed by The Motley Idiot