Analyzing AMD’s Competitive Edge Against NVIDIA in AI Era
Chicago, IL – April 4, 2025 – Zacks.com has released the latest stocks featured in its Analyst Blog. Each day, analysts at Zacks Equity Research evaluate the latest developments affecting stocks and financial markets. Recent entries include Advanced Micro Devices, Inc. (AMD), NVIDIA Corp. (NVDA), Microsoft Corp. (MSFT), Meta Platforms (META), and Oracle Corp. (ORCL).
Here are highlights from Thursday’s Analyst Blog:
Can AMD Outperform NVIDIA? Assessing Investment Potential
Advanced Micro Devices, Inc. (AMD) has established itself as a major player in the data center market, competing directly with NVIDIA Corp. (NVDA) in the graphic processing unit (GPU) sector and securing clients from NVIDIA’s roster.
Given this context, does AMD have what it takes to outshine NVIDIA on Wall Street and offer good value for investors? Let’s delve into the details.
The AI Spending Surge Benefits AMD and NVIDIA
The rising adoption of artificial intelligence (AI) is significantly benefiting both NVIDIA and AMD. Currently, only 10% of U.S. businesses are harnessing AI, indicating vast growth prospects ahead.
According to McKinsey, revenues from AI software and services are anticipated to reach between $1.5 trillion and $4.4 trillion by 2040. This forecast is promising for NVIDIA, which provides essential GPUs for AI applications and maintains a favorable position in the GPU market.
Although NVIDIA has substantial pricing power, AMD is capitalizing on the expanding GPU market for data centers. Recently, AMD has proven to be a strong contender against NVIDIA, particularly after securing notable contracts with key customers.
Can AMD Surpass NVIDIA in the Market?
NVIDIA’s stronghold in the GPU market has inevitably resulted in high prices for its products, limiting consistent purchases by many companies. Notably, some prominent players among the Magnificent Seven stocks are NVIDIA’s clients.
Consequently, AMD is able to compete effectively on price, targeting companies that cannot justify hefty investments in NVIDIA’s hardware. Larger firms are seeking affordable ways to establish their AI infrastructures. This presents an opportunity for AMD, whose MI300X chips are now utilized by Microsoft Corp. and Meta Platforms.
Oracle Corp. has also inked a multi-billion-dollar agreement with AMD for 30,000 of its latest MI355X GPUs. These chips promise 35 times the performance of the previous CNDA 3, like the MI300X, directly challenging NVIDIA’s upcoming Blackwell line.
In 2024, AMD reported revenues of $25.8 billion, with $12.6 billion coming from its data center segment—a remarkable year-over-year increase of 94%. With this momentum, AMD’s stock could experience an upturn.
However, it is unrealistic to assert that AMD shares will surpass NVIDIA’s. NVIDIA is also expected to benefit immensely from advancements in AI, reinforcing its competitive edge (read more: Which AI Stock, NVIDIA or Palantir, Offers More Upside and Is a Buy?).
Is AMD Stock a Sound Investment Currently?
With its expanding data center operations and growing customer base in the GPU domain, AMD is positioned well for current investors seeking gains.
From a valuation standpoint, AMD stock appears undervalued. As of now, AMD trades at a price/earnings ratio of 22.4X forward earnings, while NVIDIA’s forward earnings multiple is 25.06.
However, despite AMD’s attractive pricing, challenges remain. Revenues from its gaming and embedded segments declined last year, and AMD faces intense competition in the traditional computing market. Until these issues are resolved, new investors may want to exercise caution regarding AMD stock.
Currently, AMD holds a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
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Advanced Micro Devices, Inc. (AMD): Free Stock Analysis report
Microsoft Corporation (MSFT): Free Stock Analysis report
NVIDIA Corporation (NVDA): Free Stock Analysis report
Oracle Corporation (ORCL): Free Stock Analysis report
Meta Platforms, Inc. (META): Free Stock Analysis report
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