In the ongoing battle for chip supremacy, two key players in the arena are Nvidia (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD). Looking back over the past half-decade, both companies have shown formidable growth. While AMD boasts an impressive uptick of over 433%, Nvidia’s stock has soared by a remarkable 3,000% during the same period.

Comparative Analysis: Nvidia vs. AMD

Presently, the advancement of artificial intelligence (AI) infrastructure spells significant benefits for both Nvidia and AMD, given the surge in demand for graphic processing units (GPUs) crucial for large language model (LLM) training and AI inference. Notably, Nvidia’s data center segment showcased a staggering 427% year-over-year revenue increase to $22.6 billion in fiscal 2025 Q1. AMD’s data center segment also experienced robust growth, with first-quarter revenue reaching over $2.3 billion, signifying an 80% year-over-year surge.

Nvidia has firmly established its dominion in the AI chip realm, evident in its data center segment generating nearly ten times the revenue of AMD’s equivalent segment. The widespread adoption of Nvidia’s GPUs, driven by its CUDA (Compute Unified Device Architecture) software platform, has solidified its market position with over 80% market share. This strategic advantage has essentially fortified a substantial moat around Nvidia’s GPUs.

However, AMD is steadily carving its niche as well. Recent developments, such as Microsoft’s Azure cloud computing service offering clusters of AMD’s MI300X chips as an alternative to Nvidia’s products, underscore AMD’s escalating influence. Furthermore, AMD’s potential collaboration for building AI clusters with over a million GPUs presents a transformative opportunity if realized.

While Nvidia predominantly thrives on GPU products and data center revenue, AMD’s data center contribution constitutes only 43% of its total earnings, compared to Nvidia’s 87%. Although AMD’s diverse revenue streams indicate resilience, its modest growth rate of 2% year-over-year contrasts Nvidia’s impressive 262% surge.

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Assessing Investment Opportunities

Despite Nvidia’s exceptional stock performance, both stocks presently boast nearly identical forward price-to-earnings (P/E) valuations. Nvidia holds a forward P/E of 45.6, slightly surpassing AMD at 44.8.

With similar valuations, the decision on the superior stock hinges on operational performance in the upcoming years. AMD, with a smaller data center segment base, stands poised to seize market share from Nvidia, portraying growth potential. The anticipated boost in AMD’s gaming segment from 2027 onwards, aligned with the launch of Microsoft’s new gaming console and Sony’s upcoming PlayStation iteration, augurs well for sustained momentum.

In contrast, Nvidia’s enduring advantage lies in the entrenched moat facilitated by its CUDA platform. The platform’s familiarity among developers, in addition to the costs and training associated with adapting to alternative GPUs, cements Nvidia’s leadership position.

Furthermore, AMD’s strides in innovating next-generation architecture GPU platforms, catering to evolving customer demands for cutting-edge AI capabilities, project a substantial uptick in demand.

Considering the nascent stage of AI development and the burgeoning data center expansion, Nvidia emerges as the preferred investment avenue, leveraging its established moat. Nonetheless, AMD remains a promising contender, especially with the impetus of an impending gaming console refresh cycle in the near future.

Is Nvidia a Lucrative Investment?

Prior to delving into Nvidia stock, reflect on this:

The Motley Fool Stock Advisor analyst team just pinpointed the