NVIDIA vs AMD: Which is better for 2023?

Key Points

• Semiconductors have had a brutal year but it looks like the low is in. 
• NVIDIA shares are more likely to outperform when the going is good. 
• AMD shares feel more like a good bargain at current levels though. 

After a brutal year in the semiconductor space, things are starting to look up as we round the corner into 2023. Two of the better-known names to emerge as leaders in recent years, NVIDIA Corporation NASDAQ: NVDA and Advanced Micro Devices, Inc. NASDAQ: AMD have both seen their shares rally throughout the quarter so far. 

As thoughts turn to the ham and what might be left under the tree, it’s always a good idea for investors to also consider how their portfolios are looking for the year ahead. With the semiconductor industry billed to be one of the hottest for years to come, let’s take a look at some of the reasons for and against each of the two heavyweights. 

NVIDIA’s Stock Loves To Run

Its shares jumped as much as 160% in 2021, but investors have had to grit their teeth as the Jensen Huang led company’s stock subsequently fell 70% into October of this year. Still, it’s starting to look like a low might have been put in then, and the stock’s more recent performance is giving a lot of food for thought right now. 

It’s had about two months of setting higher lows and higher highs which is one of the most bullish technical patterns out there. It tells us that each dip is being bought up more aggressively and more quickly than the last, and that each pop is being sold into less and less. They’re on the verge of topping their August high which would be a significant milestone and would open up the road to $200 once again. 

Fundamentally, there are also positive signs to get behind. Last month, the team at Wedbush Securities flagged what they called NVIDIA’s “superior position” in artificial intelligence and highlighted the long-term potential for the company to outperform its peers. The ongoing headwinds in the form of inflation and supply chain issues out of China have held them, and their peers, back this year, both of these look set to dissipate in 2023. Against AMD, Wedbush called NVIDIA the “clear leader”. 

Advanced Micro Devices Looks Kind of Cheap

That’s not to say there isn’t an opportunity with NVIDIA’s neighbors from across the street, but it kind of feels more muted. While AMD shares didn’t fall as much as NVIDIA’s this year, they also didn’t rally as much as them in 2021. And since October, they’re only up 35% compared to NVIDIA’s 65%. 

Still, that didn’t stop both Wedbush and Baird from slapping a fresh price target of $100 onto their shares in recent weeks. Even from where shares closed on Tuesday, that still points to an upside potential of some 40%. Both are fans of the recently announced Genoa server offering which they expect to translate into greater market share gains and higher gross margins. 

Those in the bull camp will also point to AMD’s price-to-earnings ratio of 43, which compares favorably, and makes them look comparatively cheap, to NVIDIA’s 77. You have to be thinking that this spread will narrow heading into 2023, with the laggard, AMD, set to do most of the work given the strength of the overall industry. 

Between the two of them, you can’t really go wrong in terms of simply getting exposure to an industry that Credit Suisse sees as being on the verge of “sustained long-term growth”. Chris Caso and his team there recently acknowledged the viscous correction that shares have gone through this year but feel that further downside from here is limited. 

To choose between them is to choose between two thoroughbreds that grew up in the same field. Based on trading performance alone, NVIDIA is more likely to outperform in a straight shootout in the right environment, but investors will feel they’re getting a bargain with AMD.