Yahoo Finance Should Investors Chase Nvidia or AMD Stock at Current Levels?
The rally among many semiconductor stocks this year has provided a nice boost to the Nasdaq with the tech-heavy index up +12% year to date to outperform the broader S&P 500’s +4%.
Investors may be wondering if it’s still time to buy some of the popular names among semiconducor stocks such as Advanced Micro Devices (AMD) and Nvidia (NVDA).
Let’s see if AMD or Nvidia stock offers good value to investors at their current levels.
Performance Overview
AMD and Nvidia have continued to increase their relevance in recent years as essential chip makers. To that point, AMD has begun to pass rival Intel (INTC) as a consumer PC chip provider and is also challenging Nvidia and its dominance in the graphic processing unit (GPU) market.
Year to date, Nvidia stock has soared a stellar +81% Vs. AMD’s +49% with both outperforming the broader indexes. The rebound after last year’s drop for many stocks in the broader technology sector has been very impressive.
Image Source: Zacks Investment Research
Valuation
After such extensive rallies this year, monitoring AMD and Nvidia’s valuation will be important for investors. Trading around $96 per share and only 2% from its 52-week high AMD has a forward P/E of 32.5X. In comparison, Nvidia stock is 8% off its highs at around $265 a share and trades at 59.7X forward earnings.
Image Source: Zacks Investment Research
AMD trades 21% below its decade high of 41.6X but 36% above the median of 23.8X. When comparing this period, Nvidia looks more attractive as it trades 39% below its own decade high of 99.2X and closer to its median of 53.5X.
Wall Street has historically been ok with paying a premium for both chipmakers and they currently trade well above the S&P 500’s 18.2X. With that being said, checking AMD and Nvidia's growth is very necessary in a high inflationary environment.
Outlook
AMD earnings are now expected to dip -14% in fiscal 2023 but rebound and climb 37% in FY24 at $4.14 per share. However, earnings estimate revisions have declined for both FY23 and FY24 throughout the quarter.
Sales are forecasted to be virtually flat this year and jump 15% in FY24 to $27.18 billion.
Image Source: Zacks Investment Research
Pivoting to Nvidia, earnings are projected to jump 34% in FY23 at $4.48 per share compared to $3.34 a share in 2022. Even better, fiscal 2024 earnings are expected to soar another 33% to $5.97 a share. Earnings estimates have gone up for FY23 over the last 90 days but are slightly down for FY24.
On the top line, Nvidia’s sales are expected to be up 10% this year and jump another 25% in FY24 to $37.15 billion.
Image Source: Zacks Investment Research
Bottom Line
The top and bottom line growth of Nvidia remains attractive at the moment with its stock landing a Zacks Rank #3 (Hold) as earnings estimate revisions are slightly up for fiscal 2023. In contrrast, the declining earnings estimates for AMD’s FY23 and FY24 lands the stock a Zacks Rank #4 (Sell) at the moment.
There should certainly be better buying opportunities for both stocks throughout the year but holding on to shares of NVDA at current levels could still be rewarding considering its historical performance and valuation.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Intel Corporation (INTC) : Free Stock Analysis Report
