ZACKS·2025-04-17 20:00Core Insights - NVIDIA and AMD are central players in the AI hardware boom, producing GPUs and AI accelerators essential for training large language models and powering cloud servers [1] - Both companies have seen significant stock declines in 2023, with NVIDIA down 22.2% and AMD down 27% year to date [1] NVIDIA: The Dominant AI Force - NVIDIA is a leader in AI chips, data centers, gaming, and autonomous vehicles, with data center revenues surging 93% year over year to $35.58 billion in Q4 fiscal 2025 [5][14] - The company’s Blackwell architecture is expected to enhance AI model performance significantly, delivering up to 25 times the token throughput of its predecessor [6] - NVIDIA plans to launch the Blackwell Ultra and Vera Rubin platforms, positioning itself as a key AI infrastructure provider amid increasing investments from governments and corporations [7] - Recent export restrictions on H20 chips to China may impact NVIDIA's financial growth, with potential costs of $5.5 billion in Q1 fiscal 2026 [8][13] AMD: A Challenger With a Strong Portfolio - AMD has evolved into a strong competitor in high-performance computing, gaining traction in the cloud data center and AI chip markets [9] - The company’s data center revenues increased 69% year over year to $3.86 billion in Q4 fiscal 2024, driven by its MI300 series chips [10][14] - AMD is expanding its product portfolio with the MI325X and next-generation MI350 series, promising significant improvements in AI compute performance [11] - Similar to NVIDIA, AMD faces challenges from U.S.-China trade restrictions, estimating a cost of approximately $800 million due to export limitations on MI308 chips [13] Financials and Growth Outlook - NVIDIA's financial performance outpaces AMD, with Q4 fiscal 2025 revenues up 78% and non-GAAP EPS up 71%, compared to AMD's 24% revenue growth and 31% EPS growth in Q4 fiscal 2024 [14][16] - Projections indicate higher growth potential for NVIDIA, with expected revenue growth of 52% in fiscal 2026 and 23% in fiscal 2027, while AMD is projected to grow 23% and 19% in the same periods [15][16] - NVIDIA's earnings estimates have seen positive revisions, while AMD's estimates have been lowered recently [17] Valuation - Both companies are considered overvalued, but NVIDIA's forward P/E ratio of 22.57X is higher than AMD's 17.66X, reflecting its superior growth trajectory [18][21] - NVIDIA's premium valuation is justified by its dominant position in the rapidly growing AI and high-performance computing sectors [21] Final Thoughts - NVIDIA is viewed as the better investment choice due to its market dominance, innovative technology, and strong financials, despite its higher valuation compared to AMD [22] - Currently, NVIDIA holds a Zacks Rank 2 (Buy), while AMD has a Zacks Rank 3 (Hold) [23]