In this piece, I evaluated two semiconductor/chip stocks, Advanced Micro Devices (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA), using TipRanks’ comparison tool below to see which is better. A closer look suggests long-term bullish views for both, although a clear winner emerges upon closer examination.
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While both companies design and manufacture semiconductors, Advanced Micro Devices focuses on chips for desktop and laptop computers, data centers, servers, and game consoles, specializing in graphics processing units (GPUs) and system-on-chip (SoC) products. Meanwhile, Nvidia primarily makes GPUs for gaming devices and PCs and chips for data centers.
Both companies are developing semiconductors capable of supporting advanced artificial intelligence computing tasks, although Nvidia has leapfrogged ahead of AMD in this arena, at least for now.
Shares of Advanced Micro Devices are up 16% year-to-date and 85% over the last 12 months, while NVDA stock has soared 75.8% year-to-date and 228.6% over the last year.
With Nvidia’s year-to-date return almost matching AMD’s 12-month return, there’s a clear disconnect in terms of the share-price performance of these top two chipmakers, largely because of NVDA’s dominance in the AI space. Thus, a closer look is needed to determine the winner of this pairing.
Advanced Micro Devices (NASDAQ:AMD)
At a trailing 12-month P/E of 315.5x, Advanced Micro Devices initially looks grossly overvalued. However, its forward P/E is a far more reasonable 47.6x, which is certainly good news, although interested investors may want to monitor AMD’s valuation before buying. Nonetheless, a long-term bullish view seems appropriate for AMD.
One bit of good news is that the chipmaker’s stock price has retreated significantly from its 52-week high of around $227, although that decline hasn’t quelled all concerns about valuation. Notably, insider selling rose as AMD’s stock price increased, suggesting profit-taking among company insiders.
Still, insider sales have slowed as the stock price has pulled back, with the last Auto Sell transaction occurring 24 days ago. Thus, AMD appears to be teetering on the edge between fair value, as seen by insiders, and becoming slightly overvalued.
But with a company like Advanced Micro Devices, it’s the long term that’s most important. There’s no denying that Nvidia is far ahead of AMD in AI chips, so the critical question now is when AMD will catch up and how large of a specialized niche it can carve out for itself in the AI chip space.
The company recently launched its first AI chip, the MI300X, to compete with Nvidia’s AI offerings, and there have been reports that Microsoft (NASDAQ:MSFT) and Meta Platforms (NASDAQ:META) have placed significant orders. In the past, both companies were the primary buyers of Nvidia’s H100 GPUs, which also support AI.
One analyst expects AMD to sell $4 billion worth of MI300 chips this year and $7.6 billion next year, which would make AI chips account for up to 25% of the company’s total sales by the end of 2025. That could be a bit too optimistic.
However, it looks a bit more realistic based on a top investor’s explanation that “AMD’s chipset-based design strategy contrasts sharply with Nvidia’s monolithic approach.” He added that AMD could reshape the GPU market by offering “cost-effective, scalable solutions.”
If AMD’s chips perform at least as well as Nvidia’s offerings at a significantly lower price, the company could carve out a nice niche for itself. In fact, one report suggests data center operators can buy four of AMD’s MI300 GPUs for the price of only one of NVIDIA’s H100 GPUs, which sell for over $40,000 as Nvidia tries to eat into the backlog that has accrued due to its inability to meet demand.
Additionally, AMD recently updated its new Versal adaptive SoC chip series with a new AI model suitable for the automotive industry. In fact, Subaru (OTC:FUJHY) has already placed an order for the next-generation AI chips to use in its advanced drive-assistance system EyeSight.
Regardless, one potential concern for AMD that is worth watching is China’s decision to no longer allow chips made by AMD and other U.S.-based companies.
What Is the Price Target for AMD Stock?
Advanced Micro Devices has a Strong Buy consensus rating based on 28 Buys, six Holds, and zero Sell ratings assigned over the last three months. At $201.26, the average AMD stock price target implies upside potential of 18%.
Nvidia (NASDAQ:NVDA)
At a trailing P/E of 72.9x and a forward P/E of 34.3x, Nvidia is trading at a sizable discount to AMD despite its dominance of the AI-chip market and the recent surge in its stock price. Based on its valuation and Nvidia’s possession of over 80% of the AI chip market, a long-term bullish view seems appropriate.
Even though Nvidia stock has skyrocketed much more than AMD year-to-date, it looks like there’s more room to run, especially over the long term. Unfortunately, $352.1 million in Informative Sell and Auto Sell transactions by insiders over the last three months coincides with the recent share-price increase, indicating that insiders have been taking profits.
However, this could be less of a purely bearish signal and more of a sign that insiders may merely wish to get some of their money back out as the stock price rises. Meanwhile, analysts are as bullish as ever, and for good reason, with Morgan Stanley’s (NYSE:MS) Joseph Moore issuing a massive price target increase from $795 to $1,000 per share this month.
Additionally, Nvidia’s latest AI chips, the Blackwell series, are designed to be faster than the H100 chips with a more competitive price point, keeping Nvidia solidly in the game versus AMD’s cheaper AI chips.
What Is the Price Target for NVDA Stock?
Nvidia has a Strong Buy consensus rating based on 39 Buys, two Holds, and zero Sell ratings assigned over the last three months. At $989.53, the average Nvidia stock price target implies upside potential of 9.2%.
Conclusion: Long-Term Bullish on AMD and NVDA
Ultimately, AMD doesn’t have to be the top seller of AI chips to be a winner; it just has to carve out a significant niche for itself, which it has an excellent chance of doing. In fact, Nvidia CEO Jensen Huang said at the GTC developer conference in March that there are about $1 trillion worth of installed data centers around the globe. He estimated data center expenditures at around $250 billion last year, with an annual growth rate of about 20%.
Thus, there’s plenty of room for both companies to win, which should mean steady share-price appreciation for both over the long term. However, while both AMD and Nvidia will likely win in the AI chip race, Nvidia is the current winner of this pairing due to its more attractive valuation.
