AMD shares have surged roughly 125% in 2026, but the rally has pushed the chipmaker's valuation well past rival Nvidia's. Motley Fool analyst Keithen Drury argues that gap between AMD's price and its actual growth could weigh on the stock's future performance.
AMD trades far above Nvidia despite slower growth
AMD has risen around 125% so far in 2026, but Drury says that rally has created a major red flag for investors: a valuation that has climbed to sky-high levels. He argues the current price tag could dampen the stock's future performance or even set it up for a decline, because of the unreasonable expectations now baked into it.
Nvidia is AMD's direct competitor in the AI build-out, and the two businesses are similar enough to compare directly on valuation. However, AMD trades at 124 times trailing earnings, while Nvidia trades at 31 times. Even on 2027 earnings projections, AMD's 34 times forward earnings still tops Nvidia's 31 times trailing earnings and its 17.5 times next year's earnings.
Drury writes that a premium of that size could be deserved if AMD were growing faster than Nvidia and taking market share, but that is not the case. AMD is a more diversified company, and its other business lines are dragging on overall growth, so its sales and earnings are growing more slowly than Nvidia's.
Data center growth still favors Nvidia
Zooming into the segment both companies compete hardest in, AMD's data center revenue grew 107% in its latest quarter. Nvidia has not yet reported results for its most recent quarter, but it posted 92% data center growth in its fiscal first quarter, with its fiscal 2027 second-quarter report due at the end of August. Drury says he would not be surprised if Nvidia's data center growth rate ends up exceeding AMD's for the quarter.
He frames the two companies as similar businesses valued very differently: one priced reasonably as-is, the other needing roughly a year and a half of growth to justify its price if the stock stayed flat over that stretch. Drury believes AMD investors will eventually rotate back into Nvidia, sending AMD shares lower and Nvidia's higher. Even without that rotation, he says AMD stock could still underperform for a year given how much future success is already priced in.
Source: Motley Fool
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