This past year marked a significant shift in the competition between Advanced Micro Devices (AMD) and Nvidia. For the first time since 2019, AMD’s stock outperformed Nvidia’s. In 2022, AMD’s shares experienced a remarkable increase of 77%, compared to Nvidia’s 39% gain. This change has sparked discussions about whether AMD can maintain this momentum into 2026.
AMD’s Growth Prospects
The future looks promising for AMD. A key question remains: can AMD’s chips serve as viable alternatives to Nvidia’s premium products? Optimism arises as major tech companies, including OpenAI and IBM, have begun using AMD’s offerings. IBM has cited AMD’s chips as beneficial for quantum computing development.
CEO Lisa Su anticipates that AMD can expand its revenue by over 35% annually in the next three to five years. The company’s recent performance indicates strong demand for its new chips, further contributing to its growth.
Key Financial Metrics
- Current Price: $19.67
- Market Cap: $378 billion
- 52-week Price Range: $76.48 – $267.08
- Gross Margin: 44.33%
In contrast, Nvidia’s current stock price stands at $182.93, with a market capitalization of $4.3 trillion. Nvidia boasts a significantly larger gross margin of 70.05%, underscoring its profitability.
Valuation Comparison
Despite AMD’s strong performance, it remains smaller than Nvidia. AMD’s market cap of about $380 billion is dwarfed by Nvidia’s valuation, which is nearly 12 times greater. This disparity raises questions about future investment potential, as AMD is perceived to have more room for growth.
Analyst projections suggest AMD’s forward price-to-earnings (P/E) ratio is currently around 37. This figure is higher than Nvidia’s forward P/E of 24, indicating that Nvidia may be seen as the cheaper investment considering their respective profitability levels.
Nvidia’s Dominance in AI
Nvidia has maintained its position as the leader in the artificial intelligence (AI) chip sector. The company’s earnings over the past year totaled nearly $100 billion, while AMD reported a net income of just $3.3 billion. Nvidia’s larger revenue and profitability give it a significant edge in the long run.
Future Outlook: Who Will Prevail in 2026?
Determining the better investment between AMD and Nvidia is complex. AMD has potential for higher returns, but its success hinges on substantial earnings growth. Conversely, Nvidia is well-established in the AI market and is likely to continue performing well as investment in AI technology remains robust.
Ultimately, there is a belief that AMD could outperform Nvidia this year. As AMD scales up its AI chip business, its earnings may improve. With increasing attention from growth investors, AMD could be on the verge of a larger rally, making it a noteworthy competitor in the tech stock arena.
