AMD has become a $1 trillion company after a near-200% rally this year, but Nvidia remains far larger, growing faster, and much cheaper on a valuation basis. The gap in growth and price between the two chipmakers raises the question of whether AMD's run has outpaced its business results.
AMD joined the $1 trillion market cap club this year. It is now the ninth-best-performing stock in the S&P 500, up nearly 200%. Nvidia, however, is still ahead at a $5.5 trillion valuation.
AMD narrows the gap but Nvidia still leads
Both companies compete for share in the AI GPU market, where Nvidia took an early lead on stronger products and software. AMD has worked to close that gap, and its data center revenue rose 107% year over year to $6.7 billion in the second quarter. Companywide, AMD's revenue rose 50% to $11.5 billion.
Nvidia's numbers are larger still. Its data center division delivered 117% year-over-year growth to $89 billion. Companywide growth reached 106% to $96.2 billion, helped by less exposure to consumer and OEM demand.
AMD's stock trades well above Nvidia's
Not all of AMD's rally reflects business performance; much of it stems from rising valuation. AMD trades at 158 times trailing earnings and 81 times 2026 estimates. Even on 2027 projections, the stock trades at nearly 40 times forward earnings.
Nvidia, by contrast, trades for less than 30 times trailing earnings. On next year's forward earnings, it trades at a mere 14.7 times forward earnings. If both stocks converged toward 30 times trailing earnings, AMD investors could see about 25% downside next year, while Nvidia investors could see their stock double.
AMD is still smaller and growing slower than Nvidia, and it hasn't yet taken meaningful market share. Even so, the market has priced AMD's stock as if that battle is already won.
Source: The Motley Fool
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