Could AMD skyrocket in 2025?

With how successful Nvidia Since it is an investment, it is only natural to look at similar companies and see if they have upside potential. AMD (AMD 4.55%) also has an extensive range of graphics processing units (GPUs) used to create artificial intelligence (AI) models.

While AMD is the clear runner-up to Nvidia, could it see a surge in 2025?

AMD just posted its best quarter in two years

AMD is a much broader company than Nvidia. While Nvidia focuses on the GPU market and the various products that support it, AMD is also involved in CPUs (central processing units) used in data centers and PCs. The company also has an embedded processor segment that produces field-programmable gate arrays (FPGAs) used in purpose-built industrial applications.

Due to AMD’s diversification compared to Nvidia, it hasn’t performed as well in recent years. While Nvidia’s sales have skyrocketed since 2023, AMD’s sales have remained relatively stable.

NVDA sales data (TTM) from YCharts

However, AMD’s stagnant sales figures are due more to the company’s diversification than to its second-place GPUs. In many quarters, AMD’s data center revenue (which houses Nvidia’s comparable GPU segment) has grown rapidly. In the third quarter of fiscal 2024, revenue increased 122% year-over-year. But the rest of the business was mixed.

Customer revenue, which includes AMD’s hardware used in PCs, rose 29%, which is a good sign for AMD as this segment has struggled in recent quarters. However, the gaming and embedded segments recorded a year-on-year decline of 69% and 25%, respectively. Still, these choppy results allowed AMD to grow its revenue 18% year-over-year – its fastest growth since 2022.

AMD operating revenue (quarterly year-over-year growth) data from YCharts

But that’s just the beginning. In 2025, Wall Street analysts expect AMD’s revenue to rise 27% year-over-year and earnings per share (EPS) to rise a whopping 54%. During its third-quarter earnings call, AMD CFO Jean Hu cited the strength of its data center and customer businesses as a growth driver for 2025. She also mentioned that its embedded processor business will recover.

These will be areas to watch in 2025, but does it all add up to a stock poised for a run higher in 2025?

AMD is already quite expensive

Even though AMD has played second fiddle to Nvidia in the GPU market, it still commands quite a premium from the market. AMD stock trades at 38 times forward earnings, the cheapest price it has traded all year.

AMD PE Ratio (Forward) data from YCharts

While that seems like a bargain price compared to the rest of the year, Nvidia still trades at 45 times forward earnings.

So investors have to ask themselves: is it worth buying AMD instead of Nvidia? Finally, Wall Street analysts predict that Nvidia will grow revenue by 51% next year, with earnings per share also rising by 50%. These are similar forecasts, at least from an earnings per share perspective, but Nvidia’s revenue growth is blowing AMD out of control.

With this in mind, I think AMD could be a winning stock in 2025 as the company has strong tailwinds. However, the stock is already quite expensive (38 times expected earnings is more expensive than many large technology companies) and is experiencing similar growth to the undisputed leader in GPUs.

Therefore, I think investors are better off buying Nvidia for 2025. Nvidia is more involved in the growth trends that are driving both stocks higher and less involved in the business segments that are dragging AMD down. In other words, I still think AMD is a solid stock for 2025 – just not as good as Nvidia.