AMD's Soaring Stock Price Hides a Hidden Valuation Risk
The stock price of Advanced Micro Devices (AMD) has surged around 125% in 2026, but there's a red flag that investors shouldn't ignore. AMD is more expensive than Nvidia (NVDA), its main competitor, with a PE ratio of 124 times trailing earnings compared to Nvidia's 31. This valuation discrepancy raises concerns about AMD's future performance.
Nvidia dominates AMD in terms of growth rates, with revenue growing at 107% in Q2 for AMD's data center division, while Nvidia saw 92% data center growth in its fiscal Q1. It's likely that Nvidia's data center growth rate will exceed AMD's in the upcoming quarter.
With unreasonable expectations baked into AMD's price, investors may rotate back to Nvidia, sending AMD shares plummeting and Nvidia soaring. Alternatively, AMD could suffer a year of underperformance due to its overvalued stock price.