When it comes to semiconductor stocks, it’s virtually impossible not to think about them Nvidia. Over the past two years, the company has become the undisputed leader among chip stocks, quickly becoming one of the leaders among broader artificial intelligence (AI) companies.
But in my view, investors have been so eager to get in on the action with Nvidia that they have essentially forgotten about other chip opportunities. As 2024 draws to a close, I would encourage investors to look around and consider what opportunities might be emerging under the radar.
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I’m going to argue why an investment in Advanced micro devices(NASDAQ: AMD) now looks particularly attractive. Could AMD be Nvidia next year? I think so.
At first glance, it seems clear that Nvidia is miles ahead of AMD in the AI marathon. Over the past twelve months, Nvidia has generated a whopping $113 billion in revenue, almost five times AMD’s.
However, looking at where these revenues come from may change your view of AMD’s trajectory compared to its larger cohort.
In the table, I’ve broken down the annual revenue growth rates for each of AMD and Nvidia’s respective data center businesses:
Over the past year, Nvidia’s data center business has slowed significantly. At the same time, AMD’s data center business has gone from essentially nothing to roughly the same growth rate as Nvidia’s.
Don’t get me wrong: I’m not going to say that Nvidia is in trouble. It’s difficult to make a bear case for a company that is posting growth of over 100% every quarter.
But my broader point is that even though Nvidia is bigger than AMD, that doesn’t necessarily make it a better investment opportunity. I’m going to detail how AMD built such a formidable competitive data center business and explore why 2025 could be a milestone year for the company.
Image source: Getty Images.
A large part of the reason why Nvidia has seen such tremendous growth in its data center business stems from the fact that until recently, the company had virtually no competition in the graphics processing units (GPUs) space. With the successful launch of AMD’s MI300 accelerator, Nvidia’s first mover advantage is finally facing some headwinds.
Now you can refute my point by claiming that Nvidia’s next-generation Blackwell GPU architecture will help reduce any chance of AMD dethroning the chip king. Consider the fact that many of Nvidia’s own customers, including Microsoft And Metaplatformsalso use AMD’s MI300 GPUs.
Moreover, remember that so do these big tech giants Alphabet And Amazon (both also Nvidia customers) are also investing heavily in developing their own in-house chips in an effort to move away from an over-reliance on Nvidia.
Finally, keep in mind that AMD is also developing a GPU successor to the MI300, the MI325X, which will be available in 2025. Additionally, the company’s MI400 architecture is targeting a launch date sometime in 2026.
My point? I don’t see Nvidia’s Blackwell launch as a threat to AMD at all. AMD is innovating at an unprecedented pace, and with investment in AI infrastructure expected to increase in the coming years, I see the launch of the MI325X and MI400 as catalysts that could help AMD gain greater market share away from Nvidia.
At the time of writing this article, AMD is trading at a price-to-earnings (P/E) ratio of 29. By comparison, Nvidia’s price-to-earnings ratio currently stands at 34.
With the Blackwell launch looming, I can’t help but feel that expectations around Nvidia will increase. If the company fails to meet investor expectations, there could very well be a panic-induced sell-off in the stock.
Meanwhile, given AMD’s significantly lower valuation compared to Nvidia, I think investors are overlooking the new crop of GPUs for the next year or two. The existing MI300 footprint, combined with the launch of the MI325X next year to take on Blackwell, should help AMD continue to make progress against Nvidia – especially from its own customer base, which is already demonstrating that it is look for alternative GPU providers.
I think this is a lucrative time to buy AMD stock and prepare to hold on tight.
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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, a director at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Adam Spatacco holds positions at Alphabet, Amazon, Meta Platforms, Microsoft and Nvidia. The Motley Fool holds positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Could AMD be the Nvidia of 2025? was originally published by The Motley Fool
