Ask any gamer whether Advanced Micro Devices (NASDAQ:AMD) or NVIDIA (NASDAQ:NVDA) is better and you may get a puzzled response. While both companies make graphic cards, they don’t compete– not really.
NVIDIA uses its proprietary Turing architecture to develop powerful graphics cards, like GeForce RTX 2080, and the price tag is equally intense.
AMD has a completely different focus. It focuses more on value-oriented and budget segments of the market – people who want a good graphics card, but who don’t need the highest performing product or the price tag that comes with it.
Plus, the difference isn’t just in the hardware. The two companies are very different when it comes to software too. Nvidia’s GeForce Experience lets users broadcast play, take screenshots, and optimizes play based on the game you are playing. In contrast, AMD’s Radeon Software Adrenalin Edition does some of that but at lower resolutions than NVIDIA. Instead, it focuses more on maximizing power efficiency.
That said, the battle as to which STOCK is better is very much alive.
Is AMD Stock a Buy or a Sell?
AMD (AMD) does more than just graphics cards, or graphics processing units (GPUs) as they are technically known. It also produces central processing units (CPUs) and that makes it a competitor to chip titan Intel (INTC). For years, the company struggled to find its niche and, in turn, lost money consistently from 2013 to 2016.
It tried restructuring, twice. Then Lisa Su came along as CEO in 2014 and AMD fortunes changed. Having skipped over 10nm technology, AMD is on-track with its 7nm designs while Intel has fallen behind, which could give the company a competitive advantage.
With products in the CPU market, which is expected to reach a size of $30 billion by 2030, and the GPU industry, which is forecasted to top $10 billion, AMD may have a brighter future than its past history may suggest.
Historically, AMD has played catch-up to Intel. Some skeptics argue Intel prices its products at levels that are designed to keep AMD alive, so it avoid the glare of regulators for holding a monopoly position in its industry.
If AMD claws just a little market share – beyond its current 10% level -, AMD share price gains could be significant.
However, the secret is out that the company could burst forth with higher revenues and the share price has reflected that expectation.
AMD was on a tear from May 2018 to early October. The stock moved from roughly $10 per share to top $34. However, its share price has been falling since. AMD is currently trades at much lower price, which could be a good entry point for a long-term position.
Is NVIDIA a Good Stock to Buy?
Also, like AMD, there is more to NVIDIA than GPUs. While gaming is a large portion of the company’s revenue, it also earns significant income from data centers and automotive.
Specifically, NVIDIA has been using the expertise it gained from gaming and applying those high-performance concepts to deep learning and data center management.
The company almost tripled its revenue from data centers from 2016 to 2017 and more than doubled it from 2017 to 2018.
NVIDIA’s use of its technologies outside of gaming has spilled over into the automotive industry as well, as car makers have been buying NVIDIA chips for their upcoming driverless cars.
However, that fast-paced growth is built into the price of the stock. It is trading at more than 30 times its future earnings. That price will be justified – if the growth continues but there are lots of reasons why it may not.
The Pros and Cons of Semiconductor Stocks
So far, growth in GPUs has been driven by the popularity of multiplayer games, the applications for high-performance chips has been expanded as technology has become more integrated in our daily lives, and CPUs are benefiting from the size and abilities of semiconductor chips. The biggest pro of investing in semiconductor stocks like these is that you gain the ability to leverage those trends into investment portfolio gains.
However, the industry can also be very fickle. It is not very brand loyal. New technologies are introduced every day that could unseat a favorite. At the same time, an industry leader like Intel could be dethroned because of a delay in production. Before you invest in semiconductor stocks, it is important to realize how these fluctuations may impact your portfolio.
AMD vs NVIDIA Comparison
In the same way that NVIDIA and AMD are not comparable in terms of the markets for their graphics cards, they are also not mutually-exclusive additions to your portfolio. Both stocks have room to run, even at their current prices – but how far is unclear. AMD stands a good chance of gaining market share going forward while NVIDIA is carving out a use for its product across markets. Time will tell.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.