Nvidia (NVDA -1.29%) And Advanced microdevices (AMD -2.28%) are similar companies. Although AMD’s consumer business is larger and offers a wider range of products, these two face off in arguably the world’s most important technology battle: GPUs for artificial intelligence. While Nvidia took an early lead at the start of the 2023 AI boom, AMD has clawed its way back and is offering viable products that could serve as an alternative to Nvidia’s product line.
If you ask the market, AMD is clearly winning the battle and stealing market share, which is why its stock has almost tripled in 2026, compared to a 23% gain for Nvidia. But this mismatch in stock performance has caused the valuations of the two stocks to decouple.
This could be a huge red flag for one (or both) stocks, and investors need to understand what’s going on and take appropriate action.
Image source: The Motley Fool.
AMD’s valuation has gotten out of control
Over the past few years, the valuations of Nvidia and AMD have been fairly aligned, outside of the last six months.
AMD PE Ratio (Forward) data by YCharts
Since late spring, AMD stock has been on a tear, reaching heights never seen before. Its market capitalization now stands at around $1 trillion, but does it really deserve it? The question of what the right price is for AMD stock is a tricky one. AMD is doing its best since the AI boom began in 2023.
AMD Revenue Data (Quarterly Growth YoY) by YCharts
Its profit margins are at recent highs and its growth rate is reaching new levels. This caused the market to reassess AMD’s stock price, as it deserved, but the level reached seems a bit extreme. Even though AMD is doing its best, it is still far from where Nvidia is today. And that’s the major problem with AMD stock.
AMD is not priced correctly
During Nvidia’s most recent quarter, revenue grew 106% and hit a forecast margin of 62%. This makes it a much stronger company than AMD, and from this information alone, there is no reason to bet on AMD over Nvidia.
Today’s change
(-2.28%) $-13.86
Current price
$594.24
Key Data Points
Daily scope
$586.54 -$601.77
52 week range
$188.22 -$658.52
Volume
191.2K
Average flight
23M
Gross margin
50.37%
Next year, AMD is expected to close the gap, but not by much. The average Wall Street analyst expects Nvidia’s revenue to grow at a pace of 68% to $692 billion next year. AMD’s revenue growth is expected to be around 75%, reaching $89 billion. So, AMD should outpace Nvidia’s growth rate, but with only a few percentage points difference between the two, it’s really not much of a separation.
As a result, AMD and Nvidia will likely be tied in terms of business performance next year.
If two stocks have comparable business performance and operate in the same industry, I would say they should be priced the same. However, this is not the case. Investors need to decide whether to stick with AMD stock and potentially realize gains, or go for Nvidia stock, which is undervalued. Using earnings projections for next year, Nvidia’s stock looks like a bargain, while AMD’s looks expensive.
AMD PE Ratio (Forward 1y) data by YCharts
Even if AMD’s 2027 earnings projections are used, they are still more expensive than Nvidia’s stock is currently. That means there are about two years of growth built into the stock’s price, but none expected for Nvidia. This makes Nvidia the safest bet here, and if you own AMD stock, I think the smart move is to take the phenomenal gains the market has brought you and trade them for Nvidia before it can continue its incredible rise.
Gn bussni
