Better Buy After the Chip Sell-Off: Nvidia or AMD?

The sell-off in semiconductor stocks has been brutal. An artificial intelligence (AI) chip forecast from Broadcom in early June that was lower than expected set off a rout that erased more than $1 trillion in chip-stock value in a single session, and the selling has flared up again since. Two of the biggest names caught in it are AI chip leader Nvidia (NASDAQ: NVDA) and its closest challenger, Advanced Micro Devices (NASDAQ: AMD).

Both stocks have pulled back. As of this writing, Nvidia trades around $199, about 16% below its 52-week high. AMD, at about $520, has held up better and sits within roughly 8% of its own high.

For investors looking to buy the dip on chip stocks, this is a good place to look. But which is the better buy after the sell-off? It is tempting to assume AMD -- the smaller company that should, in theory, grow faster off a lower base. But the latest numbers tell a different story.

Image source: Getty Images.

Nvidia: bigger -- and still growing faster

Nvidia's fiscal first quarter of 2027 (the period ended April 26, 2026) was staggering for a company its size. Revenue rose 85% year over year to $81.6 billion, and data center revenue -- the heart of the AI story -- climbed 92% to $75.2 billion. For perspective, Nvidia's data center business alone is now about 13 times the size of AMD's entire data center segment.

Even more, Nvidia's growth rate isn't slowing. Nvidia guided for revenue of about $91 billion in its fiscal second quarter, which at the midpoint would be up about 95% from a year earlier. And that figure assumes no data center compute revenue from China at all.

Then there are the margins. Nvidia's non-GAAP (adjusted) gross margin was 75% in the quarter -- a level that shows how much pricing power the company still commands. Management also notably raised the dividend and added $80 billion to its buyback authorization, returning about $20 billion to shareholders during the quarter.

AMD: a solid but less impressive growth story

AMD is executing well, too.

Its first-quarter 2026 revenue rose 38% year over year to $10.3 billion, with data center revenue up 57% to $5.8 billion as its EPYC processors and Instinct GPUs gained ground. Adjusted earnings per share grew 43% to $1.37, and the company generated a record $2.6 billion in free cash flow.

And the competitive case is improving, too. AMD's next-generation Instinct lineup is drawing larger commitments from big AI customers, and management guided for about 46% revenue growth in the second quarter.

The company has carved out a genuine position as the main alternative to Nvidia.

But two gaps are hard to ignore. First, AMD's growth rate is well below Nvidia's, not above it. And its adjusted gross margin of about 55% trails Nvidia's by roughly 20 percentage points -- a reflection of Nvidia's stronger pricing power and full-stack platform.

Which is the better buy?

This is where valuation arguably seals the deal when comparing the two. After the pullback, Nvidia trades at about 31 times earnings. That is hardly a demanding price for a company growing 85% a year, with 75% gross margins and a leading position in the fastest-growing corner of the chip market.

AMD, meanwhile, trades at a price-to-earnings ratio of about 170 -- even after its recent dip. A multiple like that prices in years of flawless execution and major market share gains -- outcomes that are possible but far from guaranteed, especially as memory-chip cost inflation pressures margins across the industry.

Even when looking at the company's forward valuation multiples, or their valuations based on analysts' consensus earnings forecasts over the next 12 months, Nvidia has a forward price-to-earnings ratio of 23, and AMD's is 74 -- a huge difference.

Of course, both stocks come with risks. Both depend on AI infrastructure spending staying strong, both face tightening export rules on chips bound for China, and a valuation reset like the one investors just lived through can always get even worse.

Still, when one company is growing faster, earning much higher margins, leading its market, and trading at a fraction of the other's valuation, the decision gets easier.

After this sell-off, Nvidia looks like the more attractive buy of the two.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Broadcom, and Nvidia. The Motley Fool has a disclosure policy.