The stock market can sometimes feel like a popularity contest. Investors have flocked to Nvidia because it’s the dominant supplier of the data center chips powering artificial intelligence (AI) models. On the other hand, Wall Street has seemingly left Advanced Micro Devices (NASDAQ: AMD) in the dust. While Nvidia has soared an impressive 170% over the past 12 months, AMD has declined nearly 20%.
It’s clear that AMD isn’t the AI company Nvidia is. Its $3.5 billion in data center revenue in Q3 was a fraction of Nvidia’s $30.8 billion. However, investing isn’t always about following the herd. Often, the underdog can win big, too. Is AMD poised to perform better in 2025? Keep reading to discover if the stock is a buy right now.
AMD offers its Instinct line of accelerator chips, which are purpose-built for artificial intelligence (AI). Nvidia is currently the market leader in AI chips, but the big technology companies that buy these chips for their data centers don’t want to depend on one supplier for such a critical need. Therefore, companies like Microsoft and Meta Platforms work with other chips, including AMD’s Instinct line.
As mentioned, AMD’s data center revenue in Q3 was about 10% of Nvidia’s. That’s not bad when you’re in such a vast market. Research from S&S Insider estimates that the AI chip market will grow from $61.4 billion in 2023 to $632 billion by 2032. AMD CEO Lisa Su has estimated it will reach $500 billion by 2028, a similar trajectory.
Nvidia’s total revenue over the past four quarters was $113 billion, which shows just how much room there still is for growth in AI chips. AMD doesn’t need to lead — it can compete and still do very well for investors.
Now, let’s discuss why Nvidia’s stock has performed so well, why AMD’s hasn’t, and why that could change. Each stock’s performance over the past year makes sense when you look at the numbers. You can see below that Nvidia has grown revenue much more quickly than AMD. Given Nvidia’s superior growth, it’s not a shock that it enjoys a far higher price-to-sales ratio (P/S) than AMD. That said, AMD could soon join the party.
Data center sales (where AI chips go) make up almost all of Nvidia’s revenue, so AI-driven growth carries the whole business. However, AMD is more diversified than Nvidia, as data center revenue represents barely half of total Q3 sales.
