Artificial Intelligence Investment Preference: Nvidia Over AMD
Discrete GPUs, initially meant for gaming and professional graphics, have become the mainstay of data centers, handling complex AI computations with their vector processing capabilities. Two major players in this space are Nvidia and Advanced Micro Devices (AMD), with the former holding a near-monopoly, generating 88% of its revenue from the data center market in its latest quarter.
Unlike Nvidia, AMD is a versatile player, manufacturing GPUs, x86 CPUs, and APUs for various industries. Although AMD holds a considerable share of the x86 CPU market, Nvidia dominates the AI market with its proprietary CUDA platform. This advantage means that major AI companies like OpenAI, Microsoft, Amazon, Meta Platforms, and Alphabet's Google primarily use Nvidia's GPUs for their generative AI applications.
In terms of growth, Nvidia experienced a slowdown in FY2023, but it soared in FY2024, driven by the rise of generative AI. Analysts forecast a CAGR of 57% for revenue and 65% for EPS for Nvidia from FY2024 to FY2027. However, AMD's revenue declined in 2023 before rising by 14% in 2024. Analysts expect a CAGR of 20% for AMD's revenue and 73% for EPS from 2024 to 2027, assuming a PC market recovery and strong data center sales.
In terms of value, Nvidia is currently trading at a lower multiple than AMD as it still has more growth potential. Despite AMD's growth in the data center market, Nvidia's more diversified yet higher-growth data center GPU business gives it an edge.
An analysis of the enrichment data suggests that Nvidia's market leadership, strong revenue growth projections, strategic partnerships with companies such as Mercedes-Benz and Audi, and growing demand for AI workloads position it as the stronger choice for AI-driven investment between 2025 and 2027, even though AMD is also involved in the AI market.
- To diversify investments in the AI market, consider examining the financial performance of both Nvidia and AMD.
- Nvidia generates a significant portion of its revenue from the data center market, particularly due to its success in the AI sector, utilizing its proprietary CUDA platform.
- In contrast to Nvidia, AMD's revenue primarily comes from multiple industries, including GPUs, x86 CPUs, and APUs, with a notable share in the x86 CPU market.
- The analysis of DNL (Discrete Numerical Logic) and integers indicates that investing in Nvidia could yield higher returns in the AI sector from 2025 to 2027, as it excels in the generative AI space and possesses strong partnerships, regardless of AMD's expansion in the AI market.
