Better Artificial Intelligence Stock: AMD vs. Nvidia

One of the foundational pieces of the fast-growing artificial intelligence (AI) market has been the advanced semiconductors that make AI tools possible. Nvidia (NASDAQ: NVDA) has garnered the most attention in this space, as its processors dominate AI data centers.

But its smaller rival, Advanced Micro Devices (NASDAQ: AMD), also designs impressive artificial intelligence chips and has solid financial growth.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

So, if you're looking for a better AI stock to invest in, which is the right choice? Here's the case for both and why Nvidia is still the best way to go.

Image source: Getty Images.

The case for Nvidia

Nvidia holds an estimated 70% to 95% of the AI accelerator market, and that has led to amazing financial results for the company. Nvidia's sales soared 385% from fiscal 2023 to fiscal 2025, reaching $130.5 billion, as tech companies clamored to put Nvidia's chips in their data centers.

That's been the catalyst for Nvidia's share price surging 438% over the past two years, and while it's unrealistic to assume its stock will see similar gains over the next few years, it could still put up impressive returns.

To understand why, it's important to point out that AI is still in its early stages. It may seem like it's been around for a while now, but in terms of companies investing in AI infrastructure, we're still in the early innings.

Companies have already poured hundreds of billions of dollars into AI data centers, and they're not slowing down. Nvidia CEO Jensen Huang believes that yearly spending could reach $2 trillion by 2030.

Nvidia already benefits from this ramp-up in spending, and while tech companies always invest a lot in new technologies, AI spending may be unlike anything else in the past. PwC estimates AI could generate $15.7 trillion in additional GDP just five years from now, and tech companies are terrified to be left behind.

Consider that in the most recent earnings calls, some tech companies have talked about economic uncertainty but haven't pulled back on their AI infrastructure spending. They know they can't afford to lose the AI race.

With Nvidia's dominant AI processor position, it's hard to imagine the company not benefiting from AI's rise over the coming years. Artificial intelligence is simply too important for tech companies to try to do it on the cheap, so investing in high-end processors -- which Nvidia designs -- is likely their best approach for the next several years.

The case for AMD

One of the best cases for AMD is that the AI data center market is so large that there's room enough for two semiconductor companies to benefit. Indeed, AMD has already reaped the rewards from its growth.

AMD reported record annual revenue in 2024, with sales jumping 14% to $25.8 billion, and diluted earnings per share soared 89% to $1.00. The company's data center segment revenue also doubled from the previous year, proving that tech companies may be interested in diversifying their AI processors' needs.

That should help AMD continue its growth streak, with AMD CEO Lisa Su saying on the company's fourth-quarter earnings call that its data center business will grow by "strong double-digit" percentages this year.

With so much spending on data center processors, AMD is likely to cash in on at least some of the money being thrown around. Its processors may not keep pace with Nvidia's, but they could be a good alternative if tech companies want more supplier diversification.

The verdict: Nvidia is the hands-down winner

While AMD is doing its best to keep up, it's very clear that tech companies building AI infrastructure overwhelmingly prefer Nvidia's processors over AMD's. Nvidia has such a massive lead over AMD in this market that it's difficult to imagine AMD gaining much ground against its largest rival.

Shockingly, based on the trailing price-to-earnings multiple for both companies, AMD's shares are far more expensive. The stock has a P/E of 106, while Nvidia's is much lower at 40. So not only is Nvidia the dominant AI processor company, but its shares are also relatively cheaper, easily making Nvidia the better AI stock to own in this matchup.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $288,966!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $42,440!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $526,737!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

Continue »

*Stock Advisor returns as of March 24, 2025

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.