AMD Is Trading at 97 Times Forward Earnings While Nvidia Trades at 21 Times -- Someone's Valuation Model Is Wrong. Here's Who I Think It Is.

Nvidia (NASDAQ: NVDA) and AMD (NASDAQ: AMD) are the two largest producers of discrete GPUs. They both produce data center GPUs for the booming AI market.

However, Nvidia often attracts more attention than AMD because it controls more than 90% of the discrete GPU market. AMD, which tries to compete against Nvidia with its cheaper chips, only holds a single-digit share. Nvidia also generates most of its revenue from its data center GPUs, but AMD still sells x86 CPUs for the slower-growth PC market.

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Nvidia's stock has rallied more than 930% over the past five years, while AMD's stock has risen nearly 520%. Yet Nvidia still trades at just 21 times its projected EPS for fiscal 2027 (which started in January 2026), while AMD trades at 97 times its projected EPS for 2026.

Therefore, it certainly seems like Nvidia, with a market cap of $4.71 trillion, is still fundamentally cheaper than AMD, which is only worth $854 billion. So are analysts setting the bar too high for AMD, and too low for Nvidia? Let's dig deeper to find out.

Wall Street has consistently underestimated Nvidia

From fiscal 2021 to fiscal 2026, Nvidia's revenue and net income grew at CAGRs of 69% and 94%, respectively. That explosive growth, driven by surging sales of data center GPUs to hyperscalers and AI companies, repeatedly crushed Wall Street's estimates.

Even after the AI boom lit a blazing fire under Nvidia's business, its analysts still underestimated its growth potential. In the first quarter of fiscal 2027, its revenue surged 85% year over year to $81.6 billion, beating analysts' expectations by a whopping $2.5 billion.

From fiscal 2026 to fiscal 2029, analysts expect Nvidia's revenue and EPS to each grow at CAGRs of 46%. That growth should be driven by its new Vera Rubin platform, which merges its Vera CPUs and next-gen Rubin GPUs; the growth of the agentic AI market, increased government spending on AI solutions, and the expansion of its sticky software ecosystem. The auto sector will also likely install more of its chips in autonomous vehicles.

But if you expect Nvidia to consistently beat analysts' estimates over the next three years as those catalysts kick in, then it's likely even cheaper than 21 times this year's earnings.

AMD has also stayed ahead of Wall Street's expectations

From 2020 to 2025, AMD's revenue and net income rose at CAGRs of 29% and 12%, respectively. Its sales of Instinct data center GPUs accelerated during that period, but those cheaper chips didn't gain much ground against Nvidia's industry-standard GPUs.

Its sales of Epyc CPUs for data centers also rose, but they still control a tiny sliver of the market compared to Intel's (NASDAQ: INTC) market-leading Xeon CPUs. In other words, AMD is growing -- but it remains an underdog in the GPU and CPU markets.

From 2025 to 2028, analysts expect AMD's revenue and EPS to grow at CAGRs of 44% and 82%, respectively. That acceleration should be driven by its new Instinct MI400 and MI500 AI chips, which could pull more cost-conscious hyperscalers away from Nvidia. Its upcoming Zen 6 server chips could also boost its share of the data center market, and it will expand its ROCm software ecosystem to challenge Nvidia's proprietary CUDA software.

However, AMD has only stayed slightly ahead of Wall Street's expectations. In the first quarter of 2026, its revenue rose 38% year over year to $10.25 billion, beating the consensus forecast by $336 million but falling short of Nvidia's explosive growth.

At 97 times forward earnings, a lot of AMD's future growth is already baked into its stock. But those projections are pinned to the expectations that it will gain more momentum against Nvidia and Intel -- and that might not be as simple as Wall Street's estimates suggest.

What's Wall Street wrong about?

I believe analysts are still underestimating Nvidia while overestimating AMD's growth potential. Both stocks could still be great long-term AI plays, but Wall Street's poor track record with Nvidia suggests its stock is even cheaper than its forward multiple indicates.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, and Nvidia. The Motley Fool has a disclosure policy.