Why AMD Is a Better Buy Than NVIDIA Right Now?
May 26 2022 - 5:06AM
Finscreener.org
The last decade has seen an
astonishing rise in the share prices of semiconductor companies
such as Advanced Micro Devices (NASDAQ:
AMD) and
NVIDIA (NASDAQ:
NVDA). Since May 2012,
NVDA stock has surged a staggering 5,860% while AMD stock has
gained 1,370%. However, the ongoing sell-off has also dragged these
stocks lower in the last few months.
For example, AMD is trading 44%
below all-time highs while NVIDIA stock is down 49% from record
prices. Let’s see which beaten-down semiconductor stock between the
two should be part of your shopping list right now.
AMD
Advanced Micro Devices managed to
stage
an impressive turnaround
over the last few years. Its Radeon
graphics card has allowed the company to gain traction against
peers such as NVIDIA. In the last quarter, the average selling
prices of these graphics cards continued to drive revenue higher
for AMD.
Further, server processors such
as EPYC and Ryzen PC enabled AMD to gain market share over
Intel (NASDAQ:
INTC) as well, both in
the mobile and server businesses. The recent acquisition of
supercomputing giant Xilinx should help AMD expand into the data
center vertical as well. AMD also disclosed it might acquire
Pensando which is a distributed services platform operating in the
edge computing space.
In Q1 of 2022, AMD reported
revenue of $5.9 billion, an increase of 71% year over year. Its
non-GAAP net income more than doubled to $1.6 billion on the back
of widening gross margins and robust operating leverage. The
company expects sales to rise by 60% year over year to $26.3
billion in 2022.
AMD stock is valued at $150
billion by market cap trading at a forward price to sales multiple
of 5.7x and a price to earnings multiple of 21x which is quite
reasonable. It ended Q1 with $6.53 billion in cash and $2.16
billion in debt. Further, in the last 12-months, AMD generated $3.3
billion in levered free cash flow providing the company with enough
liquidity to reduce debt or grow via acquisitions.
NVIDIA
Valued at $423 billion by market
cap, NVIDIA is one of the largest companies in the world. In Q1 of
fiscal 2023 (ended in April), NVIDIA reported revenue of $8.29
billion with adjusted earnings of $1.36 per share. Comparatively,
analysts forecast NVIDIA to report revenue of $8.12 billion and
earnings of $1.36 per share in the April quarter.
NVIDIA forecast sales of $8.1
billion in fiscal Q2 compared to estimates of $8.45 billion. The
less than impressive guidance has dragged NVDA stock lower in
early-market trading on May 26.
NVIDIA stated it delivered record
results in Q1 across verticals such as Data Center and Gaming
despite a challenging macro-environment. Several companies across
industries are now looking to leverage artificial intelligence
capabilities which should lead to the widespread adoption of
NVIDIA’s AI computing products.
Data Center is now NVIDIA’s
largest business and the company is gearing up to launch new GPU,
CPU, DPU, and robotics processors in the second half of fiscal
2023. These graphics are expected to advance companies working in
AI, graphics, autonomous vehicles, robotics, and omniverse
verticals.
Analysts tracking NVDA
stock expect sales to rise by 29% to $34.75 billion in fiscal 2023 while
earnings are forecast to expand by 26% to $5.61 per share. NVDA
stock is valued at 12.2 times forward sales and 30 times forward
earnings which is quite steep.
AMD’s lower valuation and solid
earnings expansion in the next 12-months make it a better buy right
now compared to NVIDIA.
NVIDIA (NASDAQ:NVDA)
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