NVIDIA vs. AMD: Which Chip Stock Looks Better for 2023?

Stock prices for both have outpaced the market so far in 2023, but the chip manufacturers have different strengths.
Steven Porrello
By Steven Porrello 
Published
Edited by Rick VanderKnyff

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Despite the Federal Reserve hiking interest rates and the widespread “no thanks” around buying PC and gaming consoles, chipmakers NVIDIA and AMD have had decent performances in 2023. 

Both stocks are in the green for year-to-date growth. Both toppled analysts’ expectations with their latest earnings reports. And both are faring much better than Intel, which still can’t figure out how to stop AMD from stealing its market share. 

But if you could invest in only one chipmaker for 2023, which would be the better buy? To help you answer that for yourself, let’s compare both companies, look at their 2023 outlooks, and see why investors have been bullish (or bearish) up until now. 

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At a glance: NVIDIA vs. AMD by the numbers:

Company

Year-to-date growth

Market cap

PE ratio

Q4 revenue (2022)

Q4 net income (2022)

Q1 revenue outlook (2023)

AMD

23.04%.

$127 billion.

93.75.

$5.6 billion.

$21 million.

$5.3 billion.

NVIDIA

64.17%.

$578 billion.

134.

$6.05 billion.

$1.41 billion.

$6.50 billion.

NVIDIA  

Why it looks good for 2023: The company has taken a major lead in artificial intelligence chips and will likely continue developing them to meet demands from the tech sector. Their newest AI chip — H100 — should start shipping sometime in Q1 2023. Revenues for gaming were down, but NVIDIA has replaced them with revenue from data centers. 

Why it looks bad: The stock appears overvalued. At a share price of $235, its price-to-earnings ratio is 134. That’s higher than the average PE ratio for the semiconductor industry — 26.4. 

How it made money in 2022: 

Business segment

Q4 revenue (2022)

Year-to-year change

Gaming

$1.83 billion.

-46%.

Data centers

$3.62 billion.

+11%.

Professional visualization

$226 million.

-65%.

Automotive

$294 million.

+135%.

How NVIDIA is different from AMD: 

  • More powerful graphic cards. NVIDIA’s gaming CPUs are generally faster than AMD’s. 

  • Undisputed leader in AI chips: NVIDIA’s strongest AI chip — the A100 — is powering the AI boom. It has led to a partnership with Microsoft to build an AI supercomputer and with Google and Oracle to create AI-as-a-service. AMD has yet to release a chip that’s even remotely comparable to the A100. 

Why some investors were bullish in February: 

  • NVIDIA’s revenue for Q4 was higher than analysts were expecting: $6.05 billion versus the consensus of $6 billion. Net income was also higher than expected at $1.4 billion versus the consensus of $1.2 billion. 

  • NVIDIA is now the dominant supplier of AI chips. Artificial intelligence represents one of the biggest growth opportunities for the semiconductor industry, and NVIDIA is in a prime position to grow from it.

Why some investors were bearish:  

  • For all the hype around NVIDIA’s Q4 earnings report, the company posted some terrible year-to-year numbers. Comparing 2022 to 2021, NVIDIA’s revenue was down 21%, operating expenses were up 27%, and net income was down 53%. 

AMD

Why it looks good for 2023: AMD has grown revenues from data centers and embedded processors. It also stole market share from its struggling rival, Intel. The company plans to release an AI chip — Ryzen 7040HS — in March. 

Why it looks bad: The company doesn’t have an AI chip to compete with NVIDIA. Even with the Ryzen 7040HS, it’s unlikely the company can match the performance of NVIDIA’s superior chips. 

How AMD made money in 2022: 

Business segment

Q4 revenue (2022)

Year-to-year change

PCs and laptops

$903 million.

-51%.

Gaming

$1.6 billion.

-7%.

Data centers

$1.7 billion.

+42%.

Embedded

$1.4 billion.

+1,868%.

How AMD is different from NVIDIA: 

  • Graphics cards are more affordable: AMD’s chips are generally cheaper than NVIDIA’s. This has forced NVIDIA to come up with cheaper alternatives to their larger, more powerful chips, but AMD still has greater performance per dollar. 

  • More diversified gaming business: AMD supplies chips for both Microsoft’s Xbox series and Sony’s PlayStation 5. NVIDIA, on the other hand, supplies chips to one main console: the Nintendo Switch.  

Why some investors were bullish in February: 

  • AMD’s Q4 revenues were higher than expected: $5.6 billion reported versus $5.5 billion.

  • AMD grew its Q4 data center revenue by 42%. This was a huge turn and showed it was capitalizing off growth in cloud computing services. 

Why some investors were bearish: 

  • AMD warned it will likely see a 10% decline in Q1 revenue. 

  • AMD still commands a much smaller portion of the market than NVIDIA. By some estimates, AMD has roughly 20% of the GPU market, while NVIDIA has 80%. 

Neither the author nor editor held positions in the aforementioned investments at the time of publication.
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