Can AMD’s New Chip Challenge Nvidia?

On October 10, Advanced Micro Devices (NASDAQ: AMD) launched a new AI chip that will compete with Nvidia’s (NASDAQ: NVDA) data center graphics processors (GPUs). Known as the Instinct MI325X, it’s expected to go head-to-head with Nvidia’s forthcoming Blackwell chips.

Behemoth data centers filled with GPUs are the backbone of generative artificial intelligence and platforms like ChatGPT. With AI demand growing, the need for GPUs is rising. 

Last year, the global GPU market was valued at roughly $56.6 billion. By 2034, Precedence Research estimates it will surge to over $1.4 trillion. 

If AMD’s MI325X chip can compete with Nvidia’s offering in terms of performance while offering a lower-cost solution, it will very likely take a big bite out of Nvidia’s market share.

Unfortunately, no word on pricing yet. 

Which Stock is Better?

With the AI boom in full swing, investors want a piece of the action. When it comes to getting a piece of the proverbial AI pie, which name is better, Nvidia or AMD?

Both stocks offer promising exposure to the sector. 

It’s possible Nvidia will continue to be one of the most important companies in the industry, but it won’t enjoy outright exclusivity. Competitors like AMD, while not making as big of a splash, continue to enjoy meaningful market share, and that share could grow substantially if pricing on their new chip is low enough.

For now, let’s look under the hood… Or under the wafer, rather.  

Image: NVDA Zen Score (source: WallStreetZen)

Nvidia has a stellar Zen Score, meaning it underwent a fundamental due diligence assessment and passed with flying colors. With a score of 67, Nvidia’s score is more than twice the industry average. 

Image: AMD Zen Score (source: WallStreetZen)

While AMD’s Zen Score is lower than Nvidia’s, it remains impressive nonetheless. In fact, with a Zen Score of 50, AMD is still more than 56% higher than the industry average.

Of the 36 analysts that cover NVDA on WallStreetZen, 94% rate the stock a Buy or a Strong Buy, with the remaining two rating it a Hold. None of the analysts rate the stock a Sell or Strong Sell.

Over the next 12 months, the average analyst forecasts Nvidia will trade at $147.22, just over 9% higher than its current share price.

Like NVDA, AMD is solid. 

Of the 21 analysts that cover the name, 90% consider it a Buy or a Strong Buy, with the remaining two rating it a Hold and none rating it a Sell or Strong Sell.

Regarding price appreciation, the average analysts expect an over 18% jump in the coming year to $198.43.

The Bottom Line

Both names remain attractive, with promising new releases, solid recent results, and massive analyst support. 

Sure, AMD’s new launch could tilt performance their way, but likely, both companies will continue to be strong contenders in the growing semiconductor space and prudent exposures in your portfolio.

Interested in other ways to invest in AI innovation? Check out this blog post.

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