Nvidia, with its stock symbol NVDA enjoying a modest rise recently, has firmly established itself as a leader in the data center computing market—a significant achievement, considering the massive investment pouring into artificial intelligence (AI) infrastructure. Nvidia is reaping substantial rewards from this influx, though rivals such as AMD, highlighted with its ticker gain, are also seeing benefits.
Despite Nvidia’s seemingly unassailable lead, it’s worth noting that innovation could easily change the game. If AMD were to introduce a groundbreaking development, the gap between these two competitors might narrow considerably.
This brings us to a key question: Which stock represents a smarter AI investment for 2025—Nvidia or AMD?
Let’s delve into why Nvidia might have an unbeatable edge in the data center space. Its GPUs and corresponding software have become the benchmark. Though AMD’s GPUs appear competitive on paper, Nvidia’s unique software, CUDA, gives it a distinct advantage. This powerful tool allows GPUs to handle multiple complex computations at once, making them ideal for the demanding needs of AI computing.
The widespread industry adoption of Nvidia’s CUDA over AMD’s ROCm means that AMD faces a steep uphill battle to catch up. The cost of transitioning from one supplier to another, especially when infrastructure is already tailored to Nvidia’s system, is a key deterrent—a formidable barrier that significantly favors Nvidia.
A glance at their financials underscores Nvidia’s dominance. Both companies maintain data center divisions, but Nvidia’s performance is strikingly robust. For instance, in Q4 2024, AMD’s data center revenue climbed to $3.9 billion, a 69% growth from the previous year. Given Nvidia’s adjusted fiscal reporting, comparing AMD’s Q3 results offers clearer insight.
In Q3, AMD posted $3.5 billion in data center revenue, marking a remarkable 122% year-on-year increase. These figures, while impressive, are still dwarfed by Nvidia’s achievements.
In Q3 of FY 2025, ending October 27, Nvidia reported a staggering $30.8 billion in data center revenue, up 112% annually. This indicates Nvidia’s data center operations are about ten times the scale of AMD’s—a substantial lead. As Nvidia prepares to disclose its Q4 figures in February, expectations are high considering the heightened AI spending by major tech entities.
Nvidia’s establishment of a formidable moat with significant switching costs effectively blocks AMD from seizing a noteworthy portion of its data center market share. Yet, if AMD’s stock offers a more affordable entry, the difference might tempt some investors, given AMD’s robust growth trajectory despite its smaller scale compared to Nvidia.
Turning to valuation, surprisingly, AMD doesn’t come at a discount to Nvidia. Both firms enjoy profitability, so evaluating them via the price-to-earnings (P/E) ratio is practical.
According to YCharts, AMD appears pricier compared to Nvidia when examining standard P/E ratios. Still, both companies are experiencing vigorous growth, making it sensible to consider their forward P/E ratios as well.
On this front, AMD emerges as the more economical option. However, this price gap is largely influenced by growth rates across the enterprise. Nvidia’s revenue is forecasted to soar by 52% by FY 2026, compared to AMD’s projected 24% growth—a disparity justifying the valuation differences.
Ultimately, Nvidia is expanding at a quicker pace and maintaining its supremacy in this crucial computing arena. Although AMD remains a strong contender, from an investment standpoint, Nvidia seems the more compelling choice. Stocks that lead their sectors frequently outshine counterparts with similar initial valuations.
