A David vs. Goliath Story: The Differences Between AMD and Nvidia
While Nvidia enjoys a nearly quadrupled stock price and a whopping market cap of $2.3 trillion, its rival Advanced Micro Devices (AMD) stands at a more humble $315 billion. AMD competes head-to-head with Nvidia in the gaming and data center GPU markets, holding a mere 19% share in the former and playing catch-up in the latter against the industry giant.
Intel in the Mix: AMD’s Unique Position in the Semiconductor Space
Notably, AMD also competes fiercely with Intel in x86 CPUs for PCs and servers, holding a 35.5% share of the market in the first quarter of 2024. Over the years, AMD differentiated itself by offering cheaper, denser, and more power-efficient chips than its competitors. Outsourcing its production to Taiwan Semiconductor Manufacturing gave AMD a competitive edge, especially as Intel struggled with its internal foundries.
AMD’s Strategic Diversification and Growth Trajectory
Unlike Nvidia, AMD has diversified its revenue streams across various market segments. In 2023, AMD generated its revenue from data centers (29%), gaming (27%), embedded chips (23%), and client computing chips (21%). As AMD forays into the data center market with its AI-oriented Instinct GPUs, it aims to capture market share by offering cost-efficient alternatives bundled with its Epyc data center CPUs and programmable chips.
Analysts anticipate a 14% revenue growth for AMD in 2024, driven by the stabilization of the PC market and the expansion of its data center business. Looking ahead to 2025, revenue is expected to grow by 26%, propelled by a 51% increase in adjusted EPS.
The Outlook: A Bright Future with Room to Grow
While AMD may seem a tad pricier than Nvidia at 58x forward earnings, its strategic position in the semiconductor industry bodes well for future growth. The company’s focus on the PC market and its underdog status in the GPU and CPU markets could prevent it from outstripping Nvidia in the near term. Nevertheless, AMD’s promising trajectory and diversified revenue make it a compelling semiconductor play for investors looking beyond the traditional giants in the industry.
Should you invest $1,000 in Nvidia right now?
Before you buy stock in Nvidia, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
See the 10 stocks
*Stock Advisor returns as of March 11, 2024
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Leo Sun has positions in Apple, Meta Platforms, and Nintendo. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Meta Platforms, Microsoft, Nvidia, Oracle, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and Nintendo and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short May 2024 $47 calls on Intel. 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.
