AMD vs. Nvidia: 1 Metric Tells Me Which Is Clearly the Better Buy for 2026

Nvidia (NASDAQ: NVDA) has been the AI stock to own over the past few years, but Advanced Micro Devices (NASDAQ: AMD) seems to have stolen its crown this year. So far, Nvidia has risen 20% in 2026, while AMD is up an impressive 140%. If you look back to the start of the AI race in 2023, Nvidia still holds the lead with a 1,440% gain to AMD's 695%, but both stocks have been excellent investments in recent years.

What's the best buy moving forward? In my view, there's one specific metric that vaults one in front of the other, and after you understand it, there will be no question as to which is the better buy.

Image source: The Motley Fool.

AMD has a lot of success priced into the stock

Both of these are growing their top lines at incredible paces and doing quite well. Each company is benefiting from the AI race because they both make complete systems of graphics processing units (GPUs), central processing units (CPUs), software, and networking equipment. These solutions are deployed in mass quantities inside data centers, where they power AI training and inference. Whenever reports of AI companies spending hundreds of billions of dollars surface, expect Nvidia and AMD to be two of the biggest beneficiaries.

However, these two aren't exactly on the same playing field.

Nvidia is more than six times larger than AMD, and it has built a significant lead because its GPUs were superior to AMD's at the start of the AI race. This allowed it to capture the lion's share of the early AI data center market, which made it difficult for its clients to switch to AMD's products once they eventually caught up in capabilities.

AMD Revenue (TTM) data by YCharts.

Nvidia's net income is essentially four times larger than AMD's revenue, showing just how much larger Nvidia is than AMD. Despite that, AMD is valued at a far higher level than Nvidia, and I think this is the primary reason why investors should buy Nvidia's stock over AMD's.

AMD PE Ratio (Forward) data by YCharts.

Nvidia is valued at nearly three times the level that Nvidia is. For the better part of the last few years, these two generally traded in the same valuation range, so this uncoupling raises a few red flags. The market is essentially saying that it prefers AMD's outlook to Nvidia's, which doesn't make sense considering that Wall Street analysts expect faster growth this year from Nvidia versus AMD. Because of that, I prefer Nvidia's stock, since it isn't nearly as pricey.

For AMD and Nvidia to be valued at the same level, AMD would need to nearly triple its earnings after this year's growth is priced in. That's a tall task, and with Nvidia continuing to dominate the AI game, I think it's an impossible one for AMD.

Keithen Drury has positions in Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.