Evaluating Nvidia and AMD: Who Leads the AI Semiconductor Market?

In the rapidly evolving artificial intelligence (AI) landscape, advanced semiconductors form a critical foundation for innovative AI tools. Among the prominent players, Nvidia (NASDAQ: NVDA) stands out, dominating AI data centers with its powerful processors. However, Advanced Micro Devices (NASDAQ: AMD), a smaller competitor, is also making strides with its own AI chip designs and demonstrating solid financial growth.

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For those considering an investment in AI stocks, the question arises: which company offers the best opportunity? In this analysis, we will explore both companies, ultimately arguing why Nvidia remains the leading choice.

Image source: Getty Images.

Why Nvidia is the Leader

Nvidia commands a staggering 70% to 95% share of the AI accelerator market. This dominance has translated into remarkable financial performance. From fiscal 2023 to fiscal 2025, Nvidia’s revenue surged by 385%, reaching $130.5 billion as technology firms sought to integrate Nvidia’s chips into their data centers.

This explosive growth has driven Nvidia’s stock up by 438% over the last two years. While such gains may not recur in the immediate future, the company is expected to deliver impressive returns moving forward.

AI is still in its formative years, despite being part of discussions for some time. Investment in AI infrastructure is only beginning, with companies allocating hundreds of billions toward AI data centers. Nvidia’s CEO, Jensen Huang, predicts that annual AI spending could escalate to $2 trillion by 2030.

Nvidia is positioned well to benefit from this increased investment. Unlike other tech sectors, AI spending appears poised for unprecedented growth. According to PwC, AI could contribute an additional $15.7 trillion to global GDP within five years, prompting tech firms to ensure they keep pace.

In recent earnings calls, several technology executives acknowledged economic headwinds but maintained their commitment to investing in AI infrastructure. They recognize that falling behind in AI would be detrimental.

Given Nvidia’s dominant market position, it is likely to prosper alongside the anticipated rise in AI demand. Companies will need premium processors to stay competitive, placing Nvidia at the forefront for the foreseeable future.

The Opportunity for AMD

Regarding AMD, one of its strengths is the immense size of the AI data center market, which can accommodate multiple semiconductor companies. AMD is already capitalizing on its growth potential.

In 2024, AMD achieved record annual revenue of $25.8 billion, marking a 14% increase from the previous year. Diluted earnings per share surged by 89% to $1.00, with AMD’s data center revenue doubling compared to the prior year. This growth illustrates the demand for more diversified AI processor options among tech firms.

According to AMD CEO Lisa Su, the company expects its data center business to grow at “strong double-digit” rates this year, allowing AMD to benefit from the significant investments in processors. While AMD’s products may not match Nvidia’s capabilities, they represent a viable alternative for companies seeking to diversify their suppliers.

Final Assessment: Nvidia Remains the Clear Choice

Despite AMD’s efforts, it is evident that tech companies prefer Nvidia’s processors, given the extensive infrastructure required for AI development. The substantial lead Nvidia holds over AMD makes it difficult to envision a scenario where AMD catches up significantly.

Interestingly, AMD’s shares currently trade at a trailing price-to-earnings (P/E) ratio of 106, while Nvidia’s P/E ratio sits at a lower 40. This pricing dynamic not only underscores Nvidia’s market dominance but also highlights its relative affordability, solidifying Nvidia as the superior AI stock in this comparison.

Seize Your Opportunity Before it’s Gone

Ever felt you missed out on major investment opportunities? If so, this could be your moment to act.

Our analysis team occasionally issues a “Double Down” stock recommendation for companies poised for significant growth. If you think you’ve missed the chance to invest, now is an excellent time to consider before the opportunity vanishes. The returns speak volumes:

• Nvidia: a $1,000 investment made when we recommended it in 2009 would now be worth $288,966!*
• Apple: a $1,000 recommendation in 2008 has grown to $42,440!*
• Netflix: a $1,000 investment from 2004 is now valued at $526,737!*

Currently, we are issuing “Double Down” alerts for three impressive companies, and there may not be another opportunity like this soon.

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*Stock Advisor returns as of March 24, 2025

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.