NVIDIA Stock Vs AMD: It wasn’t all that long ago that computers were massive machines that took up entire rooms. The idea of average citizens using computers to perform routine tasks was unthinkable, and the large, costly technology was only available to major organizations like NASA.
A select few pioneering companies brought desktops to home users, and personal computing exploded. Today, inexpensive laptops, desktops, and mobile devices are increasing efficiency and accuracy in the workplace, at home, and on the go.
The power available from basic, low-cost computers is typically enough for the average user, but those that want to do more than browse the internet and run office applications have a problem.
Applications are becoming more intense and complex – especially with regard to graphics. Today’s software is ready to perform multiple functions with vivid, realistic imagery, but it can’t be done well with current computing limitations.
A handful of companies are hard at work on next-generation technology. Examples include NVIDIA, Advanced Micro Devices (AMD), and Intel (INTC). They are creating powerful central processing units (CPUs) and graphics processing units (GPUs) that are capable of running applications that are more sophisticated than ever before.
High-performance computers can handle multiple data-intensive tasks at once, and they can produce the vivid graphics that rely on speed for smooth operation.
Soon, the most advanced computers will offer an opportunity to develop and run Artificial Intelligence software that relies on “teaching” machines to make decisions and solve problems by feeding them huge quantities of data.
This could mean self-driving cars, smarter homes, and dramatic improvements in the prevention and treatment of disease.
All of this is made possible by intense focus on the internal workings of computer hardware. Each generation of CPUs and GPUs must be faster and more efficient to keep up with demands from rapidly-evolving software.
Both NVIDIA and AMD are leading the industry when it comes to innovation, so investors want to know, NVIDIA stock vs AMD: which is best?
AMD Is Attacking NVDA Market Share
Advanced Micro Devices (AMD) is obviously doing something right. Both Sony (SNE) and Microsoft (MSFT) are relying on this company for custom processors to power the PlayStation 5 and the Xbox Series X.
That alone is likely to boost AMD’s revenue substantially, as these gaming systems are the must-have gifts for a socially-distanced holiday season.
In the past year, AMD has continued to pull market share away from Intel (INTC), a leader in the high-performance computing industry – but that’s not really news.
Including third quarter 2020, AMD has bested Intel in the market share battle for 12 consecutive quarters. Intel simply hasn’t been successful in developing technology at the pace AMD has, and clients aren’t willing to settle for second-best.
Of course, Advanced Micro Devices (AMD) hasn’t stopped with pushing Intel aside. It’s hard at work on computing solutions that will compete with NVIDIA.
Specifically, AMD wants a bigger share of the graphics processing unit (GPU) market. In a contest between AMD and NVIDIA (NVDA), NVIDIA still holds the lead – for now – but AMD might have a chance to close a bit of the market share gap with the exceptionally powerful new graphics cards coming to market in the fourth quarter of 2020.
AMD’s stock price has increased roughly 137 percent in the past year, thanks in part to the announcement that third quarter revenue went up by 56 percent. A full 40 percent of that revenue was directly related to the PlayStation 5 and Xbox Series X partnership – and sales of the new gaming consoles are just getting started.
Finally, AMD is looking at opportunities to expand its cloud computing-related products, and it’s making bold moves towards that goal.
The company plans to merge with Xilinx , another chip-maker that specializes in general-purpose chips that can be customized for specific applications by end-users.
Xilinx is a leading provider of the chips that power cloud computing devices, so this expands AMD’s ability to pull market share away from Intel.
AMD Revenues Support Analyst Optimism
From a risk perspective, some investors are concerned by the cost of AMD shares. It’s price-to-earnings ratio is quite high, leading some to wonder if the company is overvalued.
While this concern is valid, most analysts aren’t worried. The company’s projected revenues for the next year show that current share prices are supported.
It’s true that growth may not continue at the same rapid pace of the past year, but by all indications the company will grow.
Analysts have indicated they expect to see an increase of 15 percent or more in share prices over the next 12 months, which makes AMD a promising choice for technology investors.
NVIDIA Growth Rate Remains Very High
NVIDIA graphics processing units (GPUs) are the number one choice for serious gamers who are willing to make big investments in their systems.
The technology is widely considered to be some of the best available, which made NVIDIA the logical choice for partners like Hyundai who are searching for the right chips to use in infotainment systems.
Though the market has been uncommonly volatile in 2020, NVIDIA has come out on top. From very early on, it was clear the pandemic would have little or no effect on NVIDIA’s business – and in fact, higher demand for in-home work and entertainment drove revenues up.
Even when the pandemic is brought under control, the demand for GPUs is projected to grow. Experts say the rate could be more than 30 percent per year through 2027. That means a market with $20 billion in revenue for 2019 will hit $200 billion in less than a decade.
Overall, NVIDIA stock has gained approximately 65 percent in just six months, and the company is expected to match or exceed those gains in coming years. NVIDIA is the top choice for technologies of the future, including gaming graphics, cloud computing, artificial intelligence, and autonomous machines.
NVIDIA reported a 76 percent year-over-year increase in earnings for the last quarter, and market analysts expect to see around 57 percent for the year.
When work-from-home demand drops, NVIDIA might not see the same numbers, but growth is likely to continue at a respectable 21 percent in the coming year. Those projections are promising enough to make NVIDIA stock a buy.
NVDA Vs AMD Market Share
In terms of high-end graphics processing, NVIDIA has been the clear market leader, commanding 80 percent of market share as compared to AMD’s 20 percent. That’s because until very recently, NVIDIA and AMD simply weren’t competing for the same clients.
NVIDIA offered better performance, but it came at a high price – a price that wasn’t practical for widespread applications such as Sony and Microsoft gaming consoles.
Only the most serious gamers were willing to invest in NVIDIA technology. In addition, NVIDIA is focused on powering artificial intelligence, and it expects to be the brains behind advances in the applications of the future, such as self-driving cars.
However, that could be changing with the new generation of AMD chips. In head-to-head comparisons, AMDs latest technology appears to outperform NVIDIA, and it is available at a much lower price point.
The newly competitive AMD technology presents the biggest risk for NVIDIA and its shareholders. Customers are most certainly going to choose better technology at a lower price, which means NVIDIA is in danger of losing market share.
AMD vs. NVIDIA Stock: The Bottom Line
All in all, both AMD and NVIDIA are smart choices for technology investors, as both are in position to grow and profit, both short-term and long-term. Income investors might prefer NVIDIA as it does pay a dividend, but the dividend isn’t large enough to persuade those with other priorities.
Generally speaking, analysts agree that AMD is likely to deliver faster growth than NVIDIA – at least in the short-term. For most investors, that means that when deciding on AMD vs NVIDIA stock, AMD is a slightly better opportunity.
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.