Which NASDAQ Stock Offers Better Value: Palo Alto Networks or Nvidia?

The tech sell-off of 2025 has created several buying opportunities. Last year, the valuations for countless tech businesses went through the roof, making it difficult to bargain hunt. If you've been waiting for the right time to jump in or add to your positions, now could be that time.

Two iconic businesses in particular have seen their share prices slump so far this year: Palo Alto Networks (NASDAQ: PANW) and Nvidia (NASDAQ: NVDA) . Both companies have compelling investment theses right now, but one stands taller with greater long-term upside.

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Nvidia has this big advantage versus Palo Alto Networks

Before deciding which stock is a smarter purchase, it's essential to initially grasp the key distinctions among the companies' respective business models.

Nvidia mainly functions as a chip manufacturer that creates graphics processing units , often called GPUs. These processors enable numerous technological advancements — including gaming, photo editing, and both machine learning and artificial intelligence (AI) applications. Simply put, Nvidia is a key provider of essential elements for many substantial and expanding sectors, with the AI sector currently showing the greatest potential.

In the meantime, Palo Alto Networks operates as a cybersecurity firm. The company’s software provides network protection, cloud security, along with various additional security offerings designed to shield enterprises from malicious entities. Their comprehensive range of products has garnered significant attention, serving over 80,000 corporate clients across the globe and safeguarding an enormous number of endpoints totaling into billions.

Both the GPU production sector and cybersecurity are expanding markets. This can be seen from their high valuations. NVIDIA’s shares are priced at 20.6 times sales compared to Palo Alto Networks, which trades at 14 times sales. However, before concluding that Palo Alto Networks is the less expensive option, it's crucial to examine the growth projections of both companies. Financial experts anticipate NVIDIA will expand at over 4 times quicker than Palo Alto Networks in the coming quarter. Additionally, Nvidia boasts considerably higher profit margins, thanks largely to its superior chips that are highly sought after by customers, particularly those in the AI sector, over almost all competitive GPUs.

Because of Nvidia’s faster growth rate, its stock trades at merely 13 times future sales — which represents only a slight premium over Palo Alto Networks’ valuation of 12.2 times projected sales. Considering its significantly better profitability margins, Nvidia appears to be the obvious choice right now. However, there is another factor that makes Nvidia an excellent investment option for potentially several years ahead, or perhaps even extending into multiple decades.

NVDA PS Ratio data by YCharts .

CUDA is Nvidia's hidden advantage.

Nvidia isn't just riding the AI wave to growth. The company invested in AI early, meaning its chips surpassed the performance of competing chips for this application many years ago. In fact, it was company's launch of CUDA -- its proprietary Compute Unified Device Architecture -- way back in 2006 that has arguably given Nvidia the edge it maintains today when it comes to chip performance and overall market share.

CUDA's main advantage was that it allowed developers to customize Nvidia's chips easily and quickly for their specific applications. This improved performance, sometimes significantly. More importantly, it entrenched these customers into Nvidia's ecosystem, making it more difficult to switch to a competitor's GPUs.

Nvidia’s strong standing in GPU technology, particularly for AI and cloud computing purposes, isn’t coincidental. Their early financial commitments coupled with the proprietary nature of CUDA have granted them a robust edge over competitors rarely observed within the rapidly evolving tech industry. Following recent declines, Nvidia’s stock seems increasingly attractive when contrasted with high-flying peers such as Palo Alto Networks. Although future price swings can be anticipated, it currently presents an opportune moment to invest in a top-tier firm capitalizing on what could well be among the most significant market expansions this century—AI-centric technologies.

Is it wise to put $1,000 into Nvidia at this moment?

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Ryan Vanzo has no holdings in any of the aforementioned stocks. However, The Motley Fool holds stakes in and endorses Nvidia. They also recommend purchasing shares of Palo Alto Networks. Additionally, The Motley Fool owns some shares in this company. disclosure policy .