AMD and Nvidia: A Valuation Paradox in the GPU Market
The GPU market is experiencing an unusual valuation split between AMD and Nvidia. Typically, when two companies in the same industry have similar operating profiles, they tend to be priced similarly. However, this is not the case for AMD and Nvidia.
Nvidia has a larger market share and is growing faster than its peer, but AMD's stock is valued at more than double Nvidia's. This discrepancy can be attributed to AMD's exposure to data centers, which is not as significant as Nvidia's. In Q2, $89 billion of Nvidia's $96.2 billion total revenue came from its data center division.
AMD's data center division generated $6.7 billion in revenue out of a total of $11.5 billion, leaving its other divisions with a higher share of total revenue. These divisions do not have the same level of operating profile as Nvidia's data center business.