AMD Stock Has Blown Past Nvidia This Year. Is It Still the Better Buy?

Advanced Micro Devices (NASDAQ:AMD) recently joined the trillion-dollar club, as the stock has been on an absolute tear this year, rising by nearly 190% thus far in 2026. By comparison, longtime rival Nvidia (NASDAQ:NVDA), which has a market cap of around $5.5 trillion, has risen at a more modest rate of 23%.

AMD is a fraction of the size of Nvidia, but it also isn't nearly as big in terms of the revenue or profit it generates. Is it still the better buy moving forward, or are investors better off going with Nvidia instead?

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The market is bullish about AMD’s newest products

Both AMD and Nvidia sell artificial intelligence (AI) chips that are in high demand. But for a while, the market appeared hesitant about AMD. In 2024, while Nvidia rose by more than 170%, AMD's stock actually declined by 18%. It was toward the latter part of last year when AMD's stock began to outperform Nvidia, and that trend has extended into this year.

The launch of the company's new Helios rack-scale AI system appears to have investors bullish about AMD's ability to compete with Nvidia. AMD launched the AI infrastructure solution a few months ago, and expectations are high that it will generate strong growth. AMD is already coming off a strong quarter for the period ending June 27, with revenue of $11.5 billion, up 50% year over year. However, for the current quarter, it's projecting a slightly slower growth rate of around 41%.

The hype around AMD has sent the tech stock to a new all-time high this week. If Helios can continue delivering strong growth numbers and ends up being the catalyst many investors hope for, it may not be inconceivable to expect AMD to continue outperforming its larger rival. There is one thing that may get in the way, however: valuation.

Nvidia’s stock is far cheaper, based on earnings

AMD's stock is running hot, but it's also running more on hype than what its financials might justify. Even based on analyst projections of future profits, it's trading at a forward price-to-earnings (P/E) multiple of around 40. By comparison, Nvidia's forward P/E is only 25, and the S&P 500 average is 20. Investors are paying a much higher premium for AMD.

Meanwhile, even if its growth rate accelerates, it might not catch Nvidia, anyway -- its sales more than doubled in its most recent quarter. Not only is Nvidia already much larger than AMD, but it's also growing at a significantly faster rate.

Investors may be focusing too much on market cap, believing that AMD is a cheap buy, rather than earnings multiples, which tell a much different story. AMD may be lighter in valuation, but so too are its profits; in the trailing 12 months, it has amassed $6.4 billion in net income while Nvidia has generated $192.9 billion. These companies just aren't even in the same ballpark.

AMD may be the hotter buy right now, but Nvidia is the more practical option for investors

Once investors dig into the financials of these companies, it becomes abundantly clear that one stock is a far better deal than the other -- Nvidia -- and it isn't even close. Nvidia is already a leader in the AI chip market, and AMD is simply trying to prove it can keep up and offer formidable competition. That certainly doesn't warrant the stock trading at such a higher valuation than Nvidia (with respect to earnings).

AMD's stock may be rallying this year, but I don't think it will continue to outperform Nvidia in the long run. It's trading at an inflated valuation, and with high expectations for Helios, there's significant downside risk in the stock. Nvidia is a much safer option for growth investors and is likely to produce better returns from here on out.

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