TLDR
- Nvidia trades at about 21 times trailing earnings, while AMD trades at about 116 times.
- Nvidia’s gross margin is 75%, compared with 54% at AMD.
- Nvidia’s quarterly revenue rose 106%, and AMD’s rose 45%.
- AMD’s data center revenue jumped 97% to $8.5 billion.
- Nvidia co-founder Jensen Huang resigned as CEO in November.
Nvidia and Advanced Micro Devices are both growing quickly in artificial intelligence chips. Their stock prices, however, reflect very different expectations.
Nvidia shares traded near $163 on November 13, giving the company a market value of about $3.93 trillion. AMD traded near $534, which valued the chipmaker at about $876 billion, less than a quarter of Nvidia’s value.
The Valuation Gap Between the Two Stocks
Nvidia’s stock traded at about 21 times its trailing earnings. AMD’s price-to-earnings ratio was about 116, more than five times higher.
This ratio shows how much investors pay for each dollar of past profit. Nvidia is the much larger company but has the lower multiple.
Forward earnings measures also favor Nvidia. That means investors are paying more for each dollar of profit that AMD is expected to earn.
AMD’s higher price reflects expectations that its AI chip business will grow quickly and win more market share. If that growth disappoints, the shares face a risk of falling.
Advanced Micro Devices, Inc., AMD
Nvidia faces its own risks. These include a slowdown in AI spending, more competition, export restrictions and uncertainty over its leadership change.
Both companies depend heavily on continued spending by large technology customers. Each one sells chips used to build AI data centers.
Growth and Profit Margins
Nvidia reported fiscal second-quarter revenue of $96.2 billion, up 106% from a year earlier. Data center revenue reached $89 billion, a 117% increase. The quarter was the latest sign of rising demand for AI computing infrastructure.
Its gross margin came in at 75%. Gross margin is the share of revenue left after the direct cost of making products.
Nvidia’s strength rests on its CUDA software platform, its networking technology and its AI accelerators. Customers already built on that infrastructure find it hard to switch to rivals.
AMD reported third-quarter revenue of $13.4 billion, up 45% from a year ago. Its data center revenue jumped 97% to $8.5 billion.
Demand for EPYC processors and Instinct AI accelerators supported that growth. AMD’s gross margin was 54%, compared with 75% at Nvidia.
AMD is using its MI450 technology and Helios platform to compete for larger AI infrastructure contracts. The company is also drawing more interest from big customers.
Microsoft, Meta and OpenAI are building AMD technology into their computing plans. Some customers are looking for alternatives to Nvidia hardware as they expand. Those deals give AMD chances to take market share.
Nvidia also faces a change at the top. Co-founder Jensen Huang resigned as chief executive in November, according to the report. His exit raises questions about the company’s long-term strategy.
Chief financial officer Colette Kress has taken over the role on an interim basis. The change came as Nvidia’s shares traded near $163 on November 13.
