Both stocks are poised to outperform the wider S&P 500 benchmark. But at this point, it is difficult to see Nvidia losing ground to AMD.

On Monday, Nvidia (NASDAQ: NVDA) commenced trading with its new 10-for-1 stock split, initially causing a brief 2.3% drop before stabilizing at $120 per share. This adjustment positions Nvidia’s stock as “cheaper” than its competitor Advanced Micro Devices (NASDAQ: AMD), which is trading at $163 per share.

Market Position and Performance

Both Nvidia and AMD are key players in the PC and gaming markets, with AMD dominating the console gaming sector. Nvidia, however, has shifted focus to data centers and high-performance computing, holding an 80% GPU market share compared to AMD’s 19%.

Despite a noticeable trend of AMD increasing its market share by 7% year-over-year, Nvidia reported massive data center revenue growth of 427% YoY to $22.6 billion. In contrast, AMD reported a modest 2% revenue increase to $5.47 billion, with $2.3 billion from the data center segment.

AI Market Dynamics

Nvidia’s first-mover advantage in AI, particularly with its H100 chips for AI language models, has secured a dominant 94% market share in the data center segment. AMD’s MI325X accelerator chips, coupled with the Vitis AI framework, aim to challenge this dominance. However, Nvidia’s established ecosystem of development tools continues to lock in AI developers.

Technological Advancements

AMD is advancing with its Embedded+ architecture and next-gen MI325X chips, featuring 3 nm packaging and HBM3E memory. Nvidia’s upcoming Blackwell series GPUs will also use advanced 3 nm processes. Both companies are neck and neck in tech innovation, though Nvidia’s integrated CUDA/GPU offerings have secured a larger AI market share.

Investment Outlook

Nvidia’s price-to-earnings (P/E) ratio, estimated to lower from 102 to 47 next year, suggests a favourable price correction and less risky earnings growth. Analysts forecast a 56% upside potential for Nvidia stock, compared to 17% for AMD. Nasdaq’s average price targets are $187.76 for Nvidia and $191 for AMD.

In summary, Nvidia’s stock split and strategic positioning in the AI market have boosted investor confidence, making it a strong contender alongside AMD in the tech and AI sectors.

©2024 Tim Fries\The Tokenist