Nvidia Leads the Semiconductor Race, But AMD Is Ready to Surge
Investors may be missing out on opportunities in the semiconductor market as Nvidia becomes the poster child for AI advancements.
As 2024 approaches, many investors are tightly focused on Nvidia, the leading chip stock. In fact, the company has positioned itself as a dominant player, especially in the artificial intelligence (AI) sector. However, this enthusiasm has overshadowed other promising options within the semiconductor space.
A look at Advanced Micro Devices (NASDAQ: AMD) reveals an inviting investment opportunity. Could AMD rival Nvidia next year? It’s a distinct possibility.
Comparing AMD and Nvidia: How Far Apart Are They?
At first glance, it seems evident that Nvidia is significantly ahead of AMD in the AI race. Over the past year, Nvidia pulled in a staggering $113 billion in revenue, nearly five times more than AMD.
However, examining the origins of this revenue provides a different perspective on AMD’s growth trajectory in contrast to its larger rival.
Below is a comparison of the year-over-year revenue growth rates for the data center sectors of both AMD and Nvidia:
| Category | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
|---|---|---|---|---|---|
| Nvidia data center revenue growth % year over year | 279% | 409% | 427% | 154% | 112% |
| AMD data center revenue growth % year over year | 0% | 38% | 80% | 115% | 122% |
Data Source: Investor relations.
Nvidia’s data center growth has slowed over the past year while AMD’s business is quickly catching up. This does not suggest Nvidia is faltering; it has impressive growth rates over 100% each quarter.
Nonetheless, Nvidia’s larger size does not automatically equate to a superior investment opportunity. I’ll delve into how AMD has developed a noteworthy data center business and discuss why 2025 may be pivotal for the company.
Image Source: Getty Images.
Why 2025 Is Crucial for AMD
Nvidia’s impressive growth is largely due to a lack of competition in the graphics processing unit (GPU) market—until recently. With AMD’s launch of the MI300 accelerator, this first-mover advantage is now being challenged.
You might argue that Nvidia’s forthcoming Blackwell GPU architecture will maintain its edge. Yet, several of Nvidia’s major clients—such as Microsoft and Meta Platforms—are now utilizing AMD’s MI300 GPUs.
Moreover, these tech giants are heavily investing in developing their own chips to reduce dependence on Nvidia. Companies like Alphabet and Amazon, also Nvidia customers, are in the same boat.
Furthermore, AMD plans to release the MI325X, a successor to the MI300, in 2025, with another architecture, MI400, set for 2026. My point? Nvidia’s upcoming Blackwell isn’t likely to pose a significant threat. AMD continues to innovate rapidly, and as investment in AI infrastructure grows, the launches of MI325X and MI400 could help AMD gain further market share from Nvidia.
Is AMD Stock Worth Buying Now?
As of now, AMD trades at a forward price-to-earnings (P/E) ratio of 29, while Nvidia stands at 34.
With the Blackwell release approaching, Nvidia’s stock expectations may rise. If it fails to meet these expectations, investors might react accordingly, leading to a drop in the stock price.
In the meantime, AMD’s relatively lower valuation compared to Nvidia may cause investors to overlook the potential of its emerging GPU lineup in the upcoming two years. The MI300’s existing foothold, coupled with the upcoming MI325X, should enable AMD to continue pushing back against Nvidia, particularly given that its customers are actively seeking alternatives.
In summary, now might be an opportune moment to invest in AMD stock and hold on for the ride.
Thinking of Investing $1,000 in Advanced Micro Devices?
Before diving into AMD, consider this important information.
The Motley Fool Stock Advisor team has recently pinpointed what they believe are the 10 best stocks to buy right now, and Advanced Micro Devices did not make the list. The chosen stocks have the potential for strong returns in the coming years.
For context, consider the case of Nvidia, which was recommended on April 15, 2005. An investment of $1,000 at that time would now be worth $872,947!
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development for Facebook, and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool also recommends options including long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
