AMD or Nvidia, which one will be a better buy given its recent onshore chip production plan

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AMD or Nvidia, which one will be a better buy given its recent onshore chip production plan?

4/17/2025 11:03am

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The deep research logic is organized as follows: 

Okay, let's tackle this question: Should the user buy AMD or Nvidia given their recent onshore chip production plans? The user is interested in the NASDAQ Composite, which is diversified, so they might be looking for a balanced approach. They have a moderate to high risk tolerance and a short to medium-term horizon.

First, I need to analyze both companies' onshore strategies. From the references, both AMD and Nvidia are moving production to TSMC's Arizona fab. AMD started production there, and Nvidia is doing the same for their Blackwell chips. Nvidia also committed to a $500 billion AI infrastructure buildout in the US, including supercomputer plants in Texas. That's a massive investment, showing strong commitment to domestic manufacturing to avoid tariffs.

Looking at the financials, Nvidia's Q1 2025 net income was $22.09 billion (Ref 25), which is impressive. Their gross margin is 58.8% (Ref 32), indicating strong pricing power. However, they face potential 125% tariffs on China, which could impact their margins if they can't pass costs onto customers. But their CEO believes the supply chain is agile enough to handle this (Ref 4, 22, 24). Also, their Blackwell architecture offers 40x performance improvement (Ref 5), which is a significant advantage in the AI race.

AMD, on the other hand, has a more diversified product line, including CPUs and GPUs. Their Q1 2025 revenue guidance is $7.1 billion (Ref 16, 17), with a focus on AI and data center growth. They're launching the MI350 series mid-2025, which is a big generational leap (Ref 16). However, their market share in AI is still behind Nvidia (Ref 19), and they face competition from Intel and others. AMD's gross margin is 54% (Ref 16), slightly lower than Nvidia, but they're investing in onshore production, which could mitigate tariff risks.

Cost-wise, TSMC's Arizona fab costs are only about 10% higher than Taiwan (Ref 31, 32). Both companies are absorbing these costs, but Nvidia's scale might allow better cost management. AMD's recent 2nm Epyc CPU (Ref 33) shows technological advancement, but their stock has dropped 54% over the past year (Ref 26), indicating market skepticism about their ability to compete in AI.

Market sentiment is mixed. Nvidia's stock fell 30% from its peak (Ref 11) but has a GF Score of 99 (Ref 15), suggesting strong fundamentals. AMD's stock is down but has a Moderate Buy rating (Ref 18, 19). However, analysts are concerned about AMD's execution risks in AI (Ref 19).

Considering the user's interest in NASDAQ and medium-term horizon, Nvidia's leadership in AI and stronger financials might be more appealing. However, AMD's diversification and potential cost advantages from onshore production could offer value. The key factors are Nvidia's AI dominance vs. AMD's broader portfolio and lower valuation.

In conclusion, Nvidia's onshore strategy and AI leadership position it as a stronger play for medium-term growth, while AMD offers a lower-risk, diversified option with potential upside if they can capture more AI market share. The user's risk tolerance and focus on the NASDAQ's tech-heavy composition might lean towards Nvidia, but AMD's undervaluation could be a contrarian pick.

Concluding Statement:
Given the geopolitical risks, tariff pressures, and accelerating AI infrastructure demand, Nvidia emerges as the stronger near-term buy due to its leadership in AI GPUs, scale, and financial resilience. However, AMD offers a high-risk, high-reward opportunity with its diversified portfolio and cost-competitive AI solutions. Below is the detailed analysis:

1. Nvidia: AI Leadership & Onshore Manufacturing Strength

AI Infrastructure Dominance: Nvidia controls ~89% of the AI server GPU market ¹, with its Blackwell architecture offering 40x performance improvement over previous generations ². This positions it to capitalize on the $500 billion AI infrastructure buildout in the U.S. ³.
Onshore Production Scale: Nvidia is building two supercomputer plants in Texas (partnership with Foxconn and Wistron) and producing Blackwell chips in TSMC’s Arizona fab ³⁴. This reduces reliance on Taiwan and mitigates potential 125% tariffs on China ⁵⁶.
Financial Resilience:
- Q1 2025 net income: $22.09 billion ⁷.
- Gross margin: 58.8% (vs. AMD’s 54%) ⁸.
- CEO Jensen Huang emphasizes "agile" supply chain flexibility to absorb tariff impacts ⁹¹⁰.
Valuation & Market Sentiment: Nvidia’s GF Score of 99/100 ¹¹ reflects strong fundamentals, though its stock fell 30% from its November 2024 peak ⁵. The 90-day tariff pause ¹² could trigger a rebound.

2. AMD: Undervalued, Diversified, but Facing Execution Risks

Onshore Focus: AMD began production at TSMC’s Arizona fab ¹³¹⁴ and plans to localize AI server assembly in the U.S. ¹³. Its 2nm Epyc CPU (Venice) is the first HPC CPU taped out on TSMC’s N2 process ¹⁵.
AI Growth Potential:
- Q1 2025 revenue guidance: $7.1 billion (up 30% YoY) ¹⁶¹⁷.
- MI350 series (mid-2025 launch) offers 35x compute performance improvement ¹⁶.
- Data center segment revenue grew 69% YoY in Q4 2024 ¹⁶.
Cost Advantages:
- TSMC’s Arizona fab costs only 10% more than Taiwan ¹⁸⁸.
- AMD’s lower valuation (forward P/E: 27.6x ¹⁹) vs. Nvidia’s 37.6x ¹¹ could offer upside if it captures AI share.
Risks:
- Limited traction in AI: AMD’s MI300X faces $800 million in potential charges due to U.S. export restrictions ⁶.
- Stock down 54% over the past year ²⁰, reflecting skepticism about its ability to challenge Nvidia’s dominance.

3. Key Differentiators & Investor Takeaway

Metric	Nvidia	AMD
AI Market Share	89% (server GPUs) ¹	11% (server GPUs) ¹
Onshore Capacity	2 new fabs in Texas + Arizona production ³⁴	Arizona fab production + localized AI server assembly ¹³¹⁴
Financial Resilience	Gross margin: 58.8% ⁸; net income: $22.09B ⁷	Gross margin: 54% ¹⁶; net income: $1.64B (2024) ²⁰
Valuation	Forward P/E: 37.6x ¹¹	Forward P/E: 27.6x ¹⁹
Risk Profile	Moderate (tariff uncertainty, 125% China tariffs ⁵⁶)	High (execution risks in AI, competition from Intel ¹)

Final Recommendation

Nvidia: Best suited for investors prioritizing near-term AI growth and resilience against tariffs. Its scale, gross margins, and Blackwell architecture leadership align with the U.S. AI infrastructure boom.
AMD: Attractive for investors seeking undervalued exposure to a diversified chipmaker with potential to disrupt Nvidia’s AI monopoly. However, higher execution risks require caution.

Given the user’s focus on the NASDAQ Composite (tech-heavy, risk-tolerant), Nvidia is the safer bet for medium-term growth. AMD offers a contrarian play but demands closer monitoring of its AI execution.

Actionable Insight: Track Nvidia’s Q1 2025 earnings (May 2025) for updates on tariff impacts and AI demand. For AMD, watch the MI350 series adoption post-launch (mid-2025).

Source:

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