Nvidia's A Startup With Apple's Margins - AMD's Just Priced Like One
At first glance, Advanced Micro Devices Inc. (NASDAQ: AMD) and Nvidia Corp. (NASDAQ:NVDA) appear to belong in the same valuation range. Both trade in the 40x forward earnings range. But that's where the similarities end – and where the pricing disconnect begins.
Margins Matter — And Nvidia's Are Untouchable
Nvidia isn't just growing – it's a profit machine. With 58% operating margins, 86% TTM revenue growth, and a balance sheet that boasts $43 billion in net cash, Nvidia runs like Apple Inc. (NASDAQ:AAPL) but grows like a startup with over 30% in operating margins and loads of cash on its balance sheet. Investors paying 40x forward earnings know exactly what they're getting: a dominant player in AI with unmatched pricing power, scale, and ecosystem control.
AMD, on the other hand, is still trying to prove it belongs in the same league. Yes, revenue is rebounding (+21.7% TTM), and yes, the MI300 chips offer a credible entry into the AI accelerator market. But AMD's 10% operating margin paints a different picture. This company is still weighed down by legacy businesses — PCs, gaming, and embedded — none of which are set to benefit meaningfully from the AI boom just yet.
AMD's Valuation Assumes It's Already Won — Has It?
So why is AMD trading at a forward P/E of 42.9x, nearly identical to Nvidia's 39.5x?
The answer might be misplaced optimism. Investors are pricing in a full-fledged AI breakout, without waiting for confirmation. AMD's valuation suggests it’s already playing at Nvidia's level, but the fundamentals don't support that story. Not yet.
This doesn't mean AMD isn't a good investment. It just means it's priced for a victory it hasn't achieved. Until AMD demonstrates that its AI revenue can scale — and its margins can follow — the current valuation may prove to be more hope than substance.
In a market obsessed with AI dominance, Nvidia's multiple is earned. AMD's looks borrowed — and the bill could come due if results don't back up the hype.
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