AMD vs Nvidia stock – two semi-conductor giants that are executing their business plans to be leaders at the bleeding edge of technology. These two microchip leaders are trading near all-time highs. Is AMD or NVDA a better buy?
The History of AMD vs Nvidia
- The AMD dynasty was founded in 1969 by Jerry Sanders and 7 others from Fairchild Semiconductor – the same company that the founders of Intel left in 1968. Sanders would serve as CEO until 2002, overseeing AMD through its IPO in 1972 and three decades of Moore’s Law.
By the time Lisa Su took the reigns in 2014, AMD was quite a mess. In 2015, AMD had negative $412 million in their equity account; meaning they had more liabilities than assets on their balance sheet.
The balance sheet transformation that Su has led puts her in the conversation for greatest non-founder CEO of all time. And if that’s not enough, the way AMD is executing in both the GPU and CPU markets should seal the deal.
When it comes to AMD vs Nvidia stock, this is a rivalry that truly runs deep. Nvdia was founded in 1993 by Jensen Huang, a former AMD chip designer.
Huang confounded Nvidia along with two others from Sun Micro Systems with the vision of personal computers becoming a device for games and multi-media.
In 1999, they invented the Graphics Processing Unit, or GPU, and had their IPO. Jensen Huang is still CEO today.
$NVDA stock has crushed the returns when compares to the SP500, it’s peers AND technology stocks in general. Semi’s are the future and investors seem to be well aware of this Report courtesy of StockRover, the best value research tool for retail investors.s.
As the inventor of the GPU, Nvidia absolutely owns that market with about 80% market share. They have specific chips for each category they serve, for example their GeForce products for gaming or the AGX family of products for self-driving cars, medical devices, or robotics.
Nvdia believes, and is proving themselves to be correct, that the GPU will be an essential element for AI (including self-driving vehicles), VR, modern data centers.
Basically any and all of the very exciting technological advances that are currently in the process of being invented. These markets should help Nvdia lock in many years of growth in the future.
AMD released new 7nm chips (the smaller the transistor, the more transistors can fit on a chip, furthering Moore’s law) in 2019; around the same time Intel released their first 10nm microchips across their entire product line.
They have the Ryzen family of products in personal computing, Radeon GPUs for gaming, and EPYC for the data center. AMD has taken a little market share from Nvdia over the past year in the GPU market.
And they’re taking market share from Intel in both computing and data center. AMD is ON FIRE! Check out the fundamental and technical stats on $AMD below.
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AMD vs NVDA Stock Financials
AMD has been executing their business plan to near perfection. But we shouldn’t lose track of NVDA’s financials. Nvidia is a cash machine with one of the best balance sheets I have ever seen.
As of January 26th, they had $10.9b in cash and equivalents against $1.9b in current liabilities. NVDA generated $4.27b in free cash flow last year while spending $2.86b on research and development and $550 million in capital expenditures.
Year over year, however, last year saw a significant downturn in both revenue and EPS, down 6.8% and 31.8% respectively.
As mentioned above, AMD has massively improved their balance sheet over the past several years to now have a debt:equity ratio below 1 (0.93) as of March 28th.
In the last full fiscal year, AMD grew revenue by 3.95% while EPS was down slightly. AMD generated $276 million in free cash flow last year while spending $1.5b on R&D and capex of $217m.
Amd vs Nvidia comparison chart – AMD dividend adjusted return vs NVDA. On the lower portion of the chart we see Pice to Sales displayed. Report from stockrover
AMD announced strong first quarter results on April 28th and see continued growth this year despite the COVID-19 headwinds. Nvida will announce their Q1 results on May 21st.
One other consideration for an investor looking at these two companies is that NVDA pays a dividend – albeit a small one ($.64/year is about a .22% yield). This reflects the strong free cash flow that NVDA generates, and confidence in their ability to continue generating plenty of cash.
One of my favorite ways to compare two growth companies is to compare their PEG ratios, which divides a company’s PE by their growth rate.
A PEG below 1 would be considered a strong buy. AMD’s PEG is around 3.5, compared to NDVA’s 4.7; suggesting pretty full pricing for each stock.
AMD’s growth has been exceptional. But NVDA continues to get a premium because of their incredible balance sheet and long history of free cash flow generation.
Which Is Better Nvidia or AMD?
- Which is better in the Nvidia or AMD debate? Nividia has owned AMD when it comes to the high end GPU market. In other words, NVDA wins when it comes to more expensive graphic cards. NVDA is more efficient than AMD and has more bang for their buck when it comes to price versus what you get.
Stock Charts In Focus
Looking at AMD vs Nvidia you can’t deny the momentum of these stocks. AMD was the best performing stock in the S&P 500 in 2018 and 2019.
They had reached an all time high of $59.27 on February 19th, the same date as the all time high for the S&P before the COVID related sell off. After the sell off, AMD rallied to retest those highs, forming a cup.
Stock Chart provided by our favorite charting platform trenspider. *Open your favorite charting tool to view the current price of $AMD*
NVDA set its all time high at the same time in February at $316.32 and is presently trading just below that level. It also looks poised for a breakout after consolidating for several days between $280 and $300.
Macro factors are driving the market in many ways right now, but a strong earnings report on May 21st is likely to push NVDA to new all-time highs. Check out the huge inverse head and shoulders on $NVDA daily chart.
Consult your data before ever pulling the trigger on an investment or trade! This report is provided by Stock Rover.
AMD Or Nvidia Stock Conclusion
The microchip space has traditionally been one of the most cyclical industry sectors in the market.
However, as the world has become increasingly dependent on digital data, chips have become almost a consumer staple.
AI, self-driving cars, online gaming, VR, and data centers are strong long-term secular trends that will provide the best semiconductor companies with a long runway for growth. Intel is the largest company in the space, but AMD and NVDA are both taking market share from INTC.
In my opinion, both companies are buys on pull backs. When it comes to AMD vs Nvidia, I personally favor AMD for their long term growth prospects and the momentum they have behind them over the past couple of years. If you are hungry for more read should you buy AMD right now?
But NVDA should be a good long term investment as well. As with anything, risk management is key, and staying up on fundamentals as well as the technicals is going to give you a healthy approach.
Let us know in the comments who ya got in the semi-conductor industry and don’t forget to check out our stock training program to up your knowledge of the charts!