Could AMD Finally Close the Gap on Nvidia AI Dominance?

Throughout its history, Advanced Micro Devices (NASDAQ: AMD) has developed a reputation for closing or at least reducing the competitive gap with rivals. This was true when it challenged Intel's supremacy in prior decades and, more recently, its clashes with Nvidia (NASDAQ: NVDA).

This includes its rivalry with Nvidia in the AI accelerator market, and its upcoming releases have captured the attention of industry analysts. The question for investors is whether it is on the verge of catching up to Nvidia and ending its dominance. The more likely outcome is that AMD will narrow but not close the gap, and here's why.

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The state of the AI accelerator market

Indeed, the semiconductor industry appeared caught off guard when it became clear that Nvidia's AI accelerators powered OpenAI's game-changing GPT-4 AI platform in 2023. Nvidia was so far ahead of rivals that even now, Nvidia holds an estimated 80% of this market, according to a Susquehanna analyst.

Moreover, closing the gap hinges on more than just processing power. Nvidia has its CUDA software platform, which has an army of loyal developers. That makes switching away from that architecture difficult.

Additionally, Nvidia offers rack-scale solutions that integrate with both its accelerators and CUDA. That presents an additional challenge to prospective competitors.

Nvidia is also growing faster. In the first three quarters of fiscal 2026, Nvidia reported 62% revenue growth. Its data center segment, which designs the accelerators and constitutes 89% of Nvidia's revenue, increased revenue by 65% during the same period.

AMD's overall growth is also impressive, but not as rapid in either respect. In the first nine months of 2025, AMD's revenue rose by 36% year over year. Also, its data center segment makes up 46% of overall revenue, and during the period, the segment's revenue rose by 29%, slower than the overall gain.

AMD's efforts to strike back

Nonetheless, as bleak as that sounds, AMD bulls should remember that that is only one quarter, and data center segment growth is likely to improve along with its technology.

Despite lagging behind, AMD has made headway in this market. The company has built strategic partnerships with OpenAI and Meta Platforms, and its accelerators support clouds for Microsoft's Azure and Oracle's Oracle Cloud. Moreover, Dell, Hewlett Packard Enterprise, and others have built servers with AMD's technology.

Looking forward, investors have focused on AMD's upcoming MI450 accelerator. The company has also claimed that the MI450 will surpass the performance of Nvidia's upcoming Vera Rubin accelerator.

Additionally, AMD relies on open-source software and can work with other tech ecosystems. That could wear away at Nvidia's software-driven competitive advantage as the industry grows.

Furthermore, Nvidia has struggled to keep up with demand, and AMD has traditionally sold its competing product at a lower cost. This gives companies all the more reason to consider AMD over Nvidia. Hence, if the MI450 can match or surpass the Vera Rubin, AMD could make significant competitive inroads.

Will AMD close the gap with Nvidia?

In the foreseeable future, investors should expect AMD to reduce but not completely close the competitive gap with Nvidia.

Indeed, AMD has made significant efforts to catch up and has won business from several high-profile customers. If the MI450 matches or exceeds expectations, it could threaten AMD's dominance.

Unfortunately for AMD, Nvidia is the established player in the AI accelerator market, and most companies are tied into its ecosystem. That means if AMD becomes the superior product, many of Nvidia's customers would likely be unable to switch to AMD without a tremendous disruption.

Ultimately, such conditions could be enough to stoke more rapid stock price increases for Advanced Micro Devices stock than Nvidia as the smaller company plays catch-up. However, investors should expect Nvidia to remain the leader in the AI accelerator industry for some time to come.

Will Healy has positions in Advanced Micro Devices. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.