Advanced Micro Devices (NASDAQ: AMD) has been one of the top performers in the S&P 500 this year, with a 160% return so far in 2026. However, despite its strong growth, the company's stock may be overvalued, according to recent analysis. AMD's revenue grew 50% year over year to $11.5 billion in Q2, driven by a 107% increase in its data center division. Yet, this growth pales in comparison to Nvidia (NASDAQ: NVDA), which reported $96.2 billion in revenue for the same quarter, up 106% year over year.
The investment thesis for AMD revolves around the company catching up to Nvidia and gaining market share. While AMD has made progress with projects like OpenAI's computing cluster and Meta Muse from Meta Platforms (NASDAQ: META), Nvidia's lead continues to widen. Nvidia's Q2 results did not include revenue from its upcoming Vera Rubin architecture chips, which are expected to further exaggerate the gap between the two companies.
Despite AMD's strong business performance, its stock has become decoupled from its actual growth. Analysts suggest that the stock's valuation far outpaces its growth expectations, making it overvalued compared to Nvidia. While AMD's forward price-to-earnings ratio is still above what analysts consider fair, Nvidia's is significantly lower, even though Nvidia is growing faster and is a larger company.
Investors are advised to consider taking gains in AMD stock and reinvesting them in Nvidia, which is seen as a more affordable and better-performing business. The Motley Fool Stock Advisor team did not include AMD in their list of top 10 stocks to buy now, highlighting the potential risks associated with the company's current valuation.