Nvidia vs. AMD: Why These Two Chip Stocks Are So Different (Explained Simply)

What’s Been Happening With Nvidia and AMD?

Over the last few years, two big computer chip companies — Nvidia (listed on the stock market as NVDA) and Advanced Micro Devices, or AMD (listed as AMD) — have seen their stock prices go up a lot.

• The main reason? Both have done well in the AI accelerator market.
  • AI accelerators are special chips that help computers think and learn like AI does.
• Nvidia got there first and became the leader, so its stock rose much more than AMD’s.
• AMD has been trying to catch up.

But the difference between the two companies is bigger than just AI chips. The way the two businesses are built is surprisingly different — and that helps explain why their stocks may be worth different amounts.

Important Point: Nvidia and AMD are both “semiconductor stocks” (companies that make computer chips), but they are built very differently on the inside.

Nvidia’s Dominance in AI Accelerators

Just four years ago (around May 2022), Nvidia was a more balanced company:

• Its data center division (the part that now makes AI accelerators) had just become its biggest business.
• It also had big businesses in:
  • Gaming (making graphics chips for video games)
  • Professional visualization
  • Automotive and robotics

But by its latest reported quarter (fiscal Q1 2027, ended April 26, 2026):

• The data center business now makes up 92% of all Nvidia’s revenue.
• The other 8% comes from a newer “edge computing” group (which now includes gaming stuff).
• Nvidia no longer separately reports gaming, visualization, etc.

Because everyone wants AI chips right now, this bet paid off:

• Revenue grew 85% in fiscal Q1 and 65% in fiscal 2026.
• The stock costs about 31 times its earnings (a way to measure if a stock is cheap or expensive).
• Some say it may now be too cheap to ignore.

Important Point: Nvidia is now almost entirely an AI data-center company, and that has made it hugely successful.

How AMD Differs

AMD took a different path.

• In 2014, CEO Lisa Su shifted the company toward making CPUs and GPUs.
  • CPU = the “brain” chip in a computer.
  • GPU = the chip that handles graphics (and also AI work).
• Four years ago, AMD’s revenue came mostly from:
  • Computing and graphics
  • Enterprise, embedded, and semi-custom chips

Today (fiscal Q1 2026):

• Data center (AI accelerators): about 56% of revenue
• Client and gaming: about 35%
• Embedded (tiny chips for smart devices/edge computing): about 9%

AMD has not abandoned its other businesses. Its embedded segment is still around the same size as when it bought a company called Xilinx.

Will AMD become mostly an AI company like Nvidia? Probably not:

• Its embedded business supports “edge computing” and physical AI.
• AMD is also strong in CPUs, which are key for building AI data centers — and Nvidia is not focused there.

Thanks to this mix, AMD grew revenue:

• 38% in Q1
• 34% in 2025

But its stock costs about 161 times earnings, which may scare off new buyers.

Important Point: AMD stays diversified (many kinds of chips), while Nvidia went all-in on AI data centers.

Nvidia vs. AMD: The Big Comparison

When we put them side by side:

• Nvidia wins on AI accelerator leadership and was first to market.
• AMD’s mixed approach (CPUs, GPUs, embedded) is smart for catching up and staying competitive.
• AMD’s growth is strong, so long-term investors probably won’t hate the stock.

However:

1. Nvidia had a “first-mover advantage” in AI accelerators.
2. Nvidia is growing faster.
3. Nvidia’s stock is cheaper relative to its earnings.

That makes Nvidia look like the better buy right now to the author.

Should You Buy Nvidia Stock Right Now?

Before you do, note this:

• The Motley Fool’s Stock Advisor team picked what they think are the 10 best stocks to buy now — and Nvidia was not on that list.
• Past wins are huge:
  • If you put $1,000 in Netflix in 2004 on their pick, you’d have $371,842.
  • If you put $1,000 in Nvidia in 2005 on their pick, you’d have $1,244,783.
• Stock Advisor says it has beaten the S&P 500 by 4x.

Summary

• Nvidia and AMD both rose on AI chip success, but Nvidia lead the way.
• Nvidia is now ~92% data-center/AI; AMD is ~56% data-center with other chip businesses too.
• AMD’s diverse style keeps it competitive, but Nvidia’s lead, faster growth, and lower price tag make it the favored stock today.
• A separate Motley Fool list of “10 best stocks” does not include Nvidia this time.

FAQ

1. What is an AI accelerator?
A special chip built to handle AI tasks quickly, like training chatbots or recognizing images.

2. Why is Nvidia’s stock considered “cheaper” than AMD’s?
Because you pay 31 times Nvidia’s yearly earnings vs. 161 times AMD’s, even though Nvidia is bigger and growing fast.

3. What does “diversified” mean for AMD?
It means AMD sells many types of chips (CPUs, GPUs, embedded) instead of relying on one area like AI data centers.

4. Is AMD expected to become just like Nvidia?
Probably not — it has good reasons to keep its embedded and CPU businesses going.

5. Should I just buy Nvidia now?
The article says Nvidia looks like the better buy, but a Motley Fool stock list leaves it out, so always do your own research.