One of the hottest spaces in the market is the semiconductor industry. As the underlying technology for nearly every secular growth end market — be it the cloud, artificial intelligence, autonomous vehicles, or robotics — and as the key piece to turning all devices into "smart" devices, chips represent the brick and mortar of the digital age.

Moreover, as we have learned in recent years, semiconductor technology is about much more than consumer trends. They are a matter of national security and we expect to see a lot of government investment in building out a domestic supply chain in the name of national security – lest we be beholden to China and the PRC’s actions regarding Taiwan.

The Charitable Trust owns four semiconductor stocks: Nvidia, Advanced Micro Devices, Broadcom, and Marvell Technology. While we view all of these companies as best of breed, they are unique in many ways, from end markets to risk/reward profiles.

Because we know investors are monitoring the group closely for a potential entry point with the iShares Semiconductor ETF (SOXX) and VanEck Semiconductor ETF (SMH) both down more than 7% from their highs, we thought it would be helpful to discuss the merits of each name and review their various characteristics.

To provide CNBC Investing Club members with as much as much information as possible on the semiconductor positions held in Jim’s Charitable Trust, we will divide this analysis into two alerts – part one here will cover Nvidia and AMD, and a follow-up part two alert will profile Marvell Technology and Broadcom.

The view on Nvidia:

Nvidia is arguably the most exciting semiconductor name on the planet. Nvidia specializes in cutting-edge graphics processing units or “GPUs” — not to be confused with central processing units or “CPUs”. Without getting too technical, the CPU is like the brains of the computer and is capable of doing many things well. On the other hand, GPUs are highly specialized and can perform a selected task with extreme efficiency. Nvidia leverages their GPU prowess for “GPU acceleration” — a process by which GPUs installed in data centers (where “the cloud” lives) can take on the more targeted complex tasks while leaving the CPUs to handle the less complex but more diverse tasks — crucial when analyzing increasingly massive amounts of data.

As the reigning GPU king, Nvidia has broad exposure to industry-critical, rapidly growing end markets, including data center, gaming, professional visualization, and autonomous driving – though we are still a few years away from autonomous vehicles really taking off.

On the software side, there is CUDA, “a parallel computing platform and programming model that makes using a GPU for general-purpose computing simple and elegant.” Nvidia was years ahead of the curve on this and as a result, much of the AI research being done today is done on Nvidia GPUs using CUDA. What that boils down to are two things: a deep competitive moat and high switching costs.

Lastly, Nvidia is currently working to acquire Arm Holdings, a move we think would solidify the company’s standing as the top dog in the semiconductor space while adding CPU exposure and expanding the company’s total addressable market or “TAM”. However, many are skeptical about Nvidia’s ability to close the ARM deal because of the significant regulatory hurdles.

Let’s put some numbers around the stock. Nvidia’s current long-term consensus growth rate is projected to be 23%, according to FactSet. That strong growth combined with the potential upside of Arm means Nvidia does sell at a premium, trading at a price-to-earnings ratio (P/E) of 45x FY2023 consensus earnings estimates. Take those two figures and we get a P/E/G, or “PEG” ratio, of roughly 2x — analysts use the PEG ratio to normalize P/E-based valuations for various growth rates.

So when it comes to Nvidia, investors should understand that it’s not the cheapest name around, and expect bouts of volatility now and then — especially when interest rate fears are heightened as those worries will be expressed via multiple contraction due to less willingness of investors to value earnings as far into the future as they may have in a lower rate environment.

The view on AMD:

Next up, Nvidia’s closest peer – Advanced Micro Devices (AMD). Like Nvidia, AMD makes cutting edge GPU chips, however, they also specialize in CPUs, giving them increased exposure to the consumer computing end market. While AMD has historically been viewed as something of a budget option in the world of computer gaming, Dr. Lisa Su, the company’s incredible CEO, has worked to significantly to reduce the performance gap and is executing flawlessly on her stated roadmap.

So while Nvidia is largely still considered to be the most cutting edge GPU maker around, AMD is definitely a best in class company. And thanks to some major missteps by CPU competitor Intel, it is gaining share in the CPU space while continuing to notch wins and grow rapidly on the GPU side in gaming and data center areas, as well with customers including Amazon, Alphabet, Microsoft and more.

On the gaming side, it is worth noting that this holiday season could provide a near-term catalyst as next-gen console supplies come online because AMD is the console gaming king. The company’s semi-custom chips are at the heart of the PlayStation 5 and Xbox Series X/S.

The one end market that AMD is not as exposed to is automotive. While autonomous driving does play into the data center, Nvidia has made greater strides on this front, working with automotive OEMs and providing virtual learning environment allowing self-driving software developers to test their algorithms in a safe virtual environment.

However, like Nvidia, AMD has an acquisition in the works, with it looking to merge with Xilinx in a move that would increase the company’s total addressable market and help bolster its data center and automotive exposure. As Su puts it, the Xilinx acquisition “marks the next leg in our journey to establish AMD as the industry’s high performance computing leader and partner of choice for the largest and most important technology companies in the world.” The acquisition is expected to close before the end of the calendar year, pending regulatory approval.

AMD does screen a bit more favorable quantitatively versus Nvidia in terms of valuation. At 35x FY2022 consensus earnings estimates and an estimated long-term growth rate of 32%, according to FactSet, its PEG ratio comes in at roughly 1.1x. (Remember, the lower the PEG ratio, the better as we are paying less for growth). Despite the differences in valuation, it is important to acknowledge that AMD and Nvidia are highly correlated – so investors should expect similar levels of volatility.

Ultimately, Nvidia and AMD represent a duopoly in the GPU space, which is why we own them both for the charitable trust. When we consider our exposure, we like to consider the weighting of these positions both on an individual and on a combined basis because of the high correlation.

Another way to think about it, if you want a pure play on GPU technology then go for Nvidia, but if you want some exposure to the CPU and console gaming end markets as well, AMD may be the stock for you. (Though we will see what happens should Nvidia successfully acquire Arm Holdings. )

Be on the lookout for our part two alert covering Marvell Technology and Broadcom, two names that do not get quite as much attention, but are certainly worth considering thanks to strong fundamentals and unique risk/reward profiles.

The CNBC Investing Club is now the official home to my Charitable Trust. It’s the place where you can see every move we make for the portfolio and get my market insight before anyone else. The Charitable Trust and my writings are no longer affiliated with Action Alerts Plus in any way.

(Jim Cramer's Charitable Trust is long AMD, AVGO, MRVL, NVDA.)