Why is AMD a better pick than Nvidia stock

The battle between chip giants Nvidia and AMD heats up as hedge funds place their bets on the future of AI and cloud computing

• Nvidia

Reports indicate hedge funds are pouring money into Nvidia, viewing it as the frontrunner in the AI and cloud computing revolution. These sectors are expected to experience explosive growth, and Nvidia's focus on these areas positions it favorably.

• AMD

While hedge funds are smitten with Nvidia, AMD has impressive financial results and strong future potential. The company recently exceeded analyst expectations for Q1 2023 earnings, showcasing a diversified product line spanning gaming, data centers, and beyond. AMD's projected revenue of $5.6 billion further strengthens its position.

Analysts are issuing buy ratings and increasing price targets for the stock. This positive sentiment reflects growing confidence in AMD's future.

1. Strong Growth Prospects

• AMD's EPS is expected to grow by a significant 58.81% in the next year and a healthy 24.66% over the next 5 years. This indicates that AMD's profits are likely to increase substantially, making the stock more valuable.
• These high growth figures suggest that AMD's profitability and market position are expected to improve steadily, making it an attractive investment for those looking to capitalize on the growth of the semiconductor industry.

2. Impressive Sales and Price Performance

• AMD's sales have been growing consistently at a rate of 31.41% over the past 5 years. This signifies strong market demand for AMD's products and indicates the company's ability to capture market share.
• Combined with a relatively stable stock price change of 4.25% over the same period, this highlights AMD's operational efficiency in converting sales into profits while maintaining a consistent stock price.
• The P/S ratio of 11.32 means that AMD generates a relatively high amount of sales for its current stock price. In simpler terms, AMD is getting good value for its stock price in terms of sales generation.

Attractive Forward P/E Ratio

• Forward P/E compares a company's stock price to its earnings. A high P/E ratio can indicate that the stock is priced high relative to its current earnings. AMD's forward P/E of 28.70 is significantly lower than its current P/E of 233.23. This suggests that the market expects AMD's earnings to grow substantially in the future, potentially leading to a higher stock price.
• This lower forward P/E ratio makes AMD an attractive option for value-oriented investors who are looking for stocks that are currently priced lower than their future earnings potential suggests.

AMD Technical Analysis

Support

These are price zones where the stock price might find buyers and bounce back up. Four important support areas to watch.

153.21 - 154.47: This is a strong support zone formed by a confluence of trend lines and moving averages across different timeframes, suggesting significant historical buying pressure at this level.

146.63 - 148.62: Another support zone formed by trend lines, indicating potential buying interest in this range.

144.26: A horizontal support level from the daily timeframe. This suggests historical buying at this specific price point in the past.

125.83: A longer-term support level based on a trend line in the weekly timeframe. This signifies a potential buying zone based on historical weekly price action.

Resistance

This is a price zone where the stock price might face selling pressure and struggle to break through. Only one important resistance area.

162.63 - 162.99: This zone is formed by a combination of trend lines and moving averages, suggesting potential selling pressure from previous price action.

If the stock price falls, these support levels indicate areas where it might find buying interest and reverse its downward trend. Conversely, if the stock price rises, the resistance zone suggests a price point where it might encounter selling pressure and struggle to continue climbing.

The Verdict

In summary, AMD's valuation points towards a company with strong growth prospects, a solid track record of sales and price performance, and the potential for significant future earnings growth. This combination of factors makes AMD an interesting investment opportunity for those looking to benefit from the booming semiconductor industry.

The current market sentiment favors Nvidia, but AMD remains a formidable competitor. Strong financials, analyst confidence, and a compelling valuation paint a bright future for AMD.