‘It Makes No Sense,’ Says Top Investor About AMD Stock

Advanced Micro Devices (NASDAQ:AMD) has turned into one of the AI-driven market’s most successful recent stories. The stock has gained 91% year-to-date, as investors buy into CEO Lisa Su’s strategy to position the company as a major force in the AI era.

The chipmaker has been gaining ground across both CPUs and GPUs, steadily strengthening its position as one of the few companies viewed as a legitimate challenger to Nvidia. In several areas, AMD’s technology is viewed as competitive with – and in some respects potentially ahead of – Nvidia’s, including its push into 2nm architecture. At the same time, the company has continued taking share in CPUs, a market becoming more important as AI deployments expand across data centers and enterprise infrastructure.

Yet, despite AMD’s growing standing in AI, top investor James Foord, who ranks among the top 3% of stock pros on TipRanks, argues the company’s current valuation relative to Nvidia “makes no sense.”

However, its valuation right now, when compared to Nvidia, “makes no sense,” says top investor James Foord, who’s ranked among the 3% of stock pros on TipRanks.

Foord thinks there are “reasons to be bullish on AMD,” but reminds investors that Nvidia remains a clear market leader. Nvidia has also recently introduced its own CPU, positioning it to compete with both AMD and Intel for market share. It is also actively working to deepen its dominance in GPUs and increase customer stickiness, including through initiatives such as launching an open-source AI agent model.

Despite this leadership position, stronger margins, and broadly similar growth expectations, from a valuation perspective, Nvidia has “fallen behind.”

Back in October 2024, Nvidia traded at a much higher P/E multiple than AMD, reflecting Nvidia’s dominant position in GPUs and AI infrastructure at the time. Since then, both stocks have continued climbing, yet the valuation gap has flipped dramatically, with Nvidia’s P/E compressing to around 40 while AMD’s has expanded to roughly 90. Such a divergence would normally suggest AMD is expected to grow materially faster than Nvidia going forward, but that does not appear to be the case. On both a PEG and forward PEG basis, AMD is now trading at roughly double Nvidia’s valuation.

Moreover, Foord points out that Nvidia also remains far more profitable, with an EBITDA margin of about 61% compared to AMD’s 19.8%.

“All in all, I remain optimistic about AMD, but I think the market has gotten ahead of itself,” Foord said. “I’ve been behind the AMD turnaround narrative for some time, but now we’re pretty much at a full valuation.”

As such, the 5-star investor has now downgraded his rating on AMD from Strong Buy to Sell. (To watch Foord’s track record, click here)

So, that’s Foord’s view, but what does the Street have in mind? The current outlook offers a conundrum. On the one hand, based on 27 Buys and 8 Holds, AMD stock has a Strong Buy consensus rating. However, after soaring so high this year, analysts, at least for now, expect shares to remain rangebound over the coming months, with the average price target clocking in at $442.94. (See AMD stock forecast)

Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.