AMD has been gaining momentum lately.
It is a hotly debated topic if Nvidia (NVDA -1.18%) or AMD (AMD 0.37%) Better artificial intelligence (AI) is stock. Both are key suppliers when it comes to AI, as their graphics processing units (GPUs) are used in data centers to process these intensive models. While Nvidia has dominated the early innings of the AI arms race, there's nothing saying that AMD can't come out on top as the market matures.
So, which of these two AI juggernauts is the better investment? Let's find out.
Nvidia's data center GPUs have been far more successful than AMD's.
GPUs are essential for processing AI models because they can execute calculations in parallel. This allows them to train AI models much faster than a traditional CPU (Central Processing Unit). The effect is magnified when hundreds or thousands of GPUs are connected to a data center, and more parallel processing paths are created.
Both Nvidia and AMD make these GPUs for data centers, though Nvidia's products have overwhelmingly become the top choice. In the first quarter of fiscal 2025 (ending April 28), Nvidia's data center division generated revenue of $22.6 billion, up 427% from a year earlier. Compared to AMD's Q1 (ended March 31) data center revenue of $2.34 billion (up 80% from last year), Nvidia is far superior.
However, this is part of the reason why investors are bullish on AMD. For Nvidia, business couldn't be much better, setting a high bar for implementation. For AMD, business is good, but could grow with the right product launch.
Another factor to consider is that AMD's product line is much broader than Nvidia's. While Nvidia focuses on GPUs and other ancillary data center products, AMD also produces CPUs for PCs, GPUs for gaming systems (such as the PS5) and embedded microprocessors. Nvidia similarly has GPUs for other purposes like gaming and automobiles, but it's laser-focused on GPUs and their ecosystem, while AMD is much broader.
At last count, AMD and Nvidia had roughly the same size workforce, with Nvidia at 29,600 workers and AMD at 26,000. This is important to understand, as it is unlikely that AMD will ever close the technology gap. With a small workforce that is less focused on one product, catching up to a competitor is nearly impossible.
However, AMD has long lived on this model.
AMD is used to playing second.
when Intel A dominant force in the CPU market, it was often said that Intel only allowed AMD to survive to avoid being sued by the Federal Trade Commission (FTC) for having a monopoly. That sentiment still seems like an apt assessment today, as Nvidia dominates the data center GPU space.
However, AMD is also starting to earn business from cloud giants (eg Microsoft Azure) as an alternative choice. AMD and Microsoft recently announced that AMD products will be available to customers in addition to Nvidia products to help train AI models.
This is an important development, as Microsoft is sending a warning to Nvidia that it can also use a competitor's product and be successful. Two other cloud computing providers, Amazon Web Services (AWS) and the alphabets Google Cloud is also starting to build its own chips for AI training, which could further hurt Nvidia's business.
That wraps up the bull case for AMD. This is just an alternative. Basically, it has nothing to lose and everything to gain, while Nvidia is the complete opposite. However, this is not how investing has historically worked. Whether you are comparing Walmart Kmart or Sears, or even McDonald's Burger King, the industry leader, has proven time and time again the most successful investment.
Even though Nvidia is the best in the world, it is still the top provider among all cloud computing providers, despite the fact that consumers are looking for alternatives. Consumers are familiar with Nvidia's ecosystem, and it's a great product.
To me, Nvidia is still a much better buy than AMD, as investing in the industry leader is a timeless investment strategy that has paid off over the years.
Suzanne Frey, an Alphabet executive, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, is a member of the board of directors of The Motley Fool, an Amazon subsidiary. Keith Dre has positions at Alphabet and Amazon. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Microsoft, Nvidia and Walmart. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a Disclosure Policy.