Why Nvidia Remains the Top AI Play Despite AMD's Gains

The race for AI dominance has never been fiercer, with AMD making strides to challenge Nvidia's longstanding leadership. Yet, a deeper look into valuation metrics, earnings momentum, and market dynamics reveals why Nvidia (NASDAQ: NVDA) remains the preeminent AI investment—despite AMD's (NASDAQ: AMD) undoubted progress.

Valuation: A Tale of Two PEG Ratios

While AMD's valuation appears compelling at first glance—its forward P/E of 22.66x in 2025 is 11% below its sector median—its PEG ratio of 0.53 still lags behind Nvidia's astonishing 0.09 (as of early 2025). This stark contrast underscores a critical truth: Nvidia's earnings are growing at a blistering pace.

Nvidia's PEG plummeted to 0.09 in early 2025 due to an 800% surge in trailing EPS (from $0.19 to $1.71 over 12 months), while its stock price dipped 30% from its 2025 peak. This created a rare “value trap” scenario: a $3.3 trillion market cap (as of June 2025) now trades at a PEG ratio that's 86% below its 12-month average. AMD, meanwhile, trades at a PEG of 0.53—still favorable but far from Nvidia's outlier status.

Earnings Momentum: Growth That Justifies the Price

Nvidia's AI-driven earnings machine is unmatched. Its $1.71 TTM EPS (as of mid-2024) is projected to rise to $4.35 by early 2026, supporting a forward P/E of 33.15—still low relative to its growth trajectory. AMD's 25% YoY revenue growth in Q1 2025 is impressive, but it pales against Nvidia's dominance in AI's most lucrative segments: data center GPUs (70% market share) and AI software ecosystems like CUDA.

AMD's net cash of $2.8 billion and AI-focused initiatives are positive, but its reliance on CPU sales (still 60% of revenue) leaves it trailing in the GPU race. Nvidia's CUDA platform, used by 90% of AI researchers, creates a near-insurmountable moat.

Market Dominance: AI's Software-Defined Future

Nvidia's lead isn't just about hardware. Its AI software stack—including tools for generative AI, robotics, and quantum computing—anchors its position as the defacto partner for cloud giants like Microsoft and Google. Even as AMD gains data center share (now 15% vs. Nvidia's 70%), its software ecosystem lags.

Nvidia's $53.7 billion cash reserves and strategic acquisitions (e.g., Mellanox for networking) further cement its ability to out-invest AMD in AI's next waves. Meanwhile, AMD's AI gains, while real, are still niche—its MI300X chip, for instance, targets specific workloads but lacks the broad adoption of Nvidia's H100.

Risks and Investment Advice

Nvidia isn't without risks. Regulatory scrutiny over AI monopolies and trade restrictions could slow growth, while AMD's valuation offers a lower-risk entry point. However, for investors willing to ride AI's secular boom, Nvidia's 3-year CAGR of 765% (vs. AMD's 150%) justifies its premium.

Recommendation:
- Overweight Nvidia: Its software, cash, and AI ecosystem make it the safest long-term bet. Target a PEG ratio rebound to 1.0 (still below historical averages) as a buy signal.
- Consider AMD for diversification: Its undervalued PEG and AI progress make it a satellite holding, but avoid overconcentration.

Conclusion

AMD's gains are a testament to its resilience, but Nvidia's AI hegemony—rooted in software, scale, and execution—remains unshaken. In a sector where software defines the future, Nvidia's lead is as wide as ever. For now, the title of “Top AI Play” belongs squarely to green-and-orange.

Disclosure: This analysis is for informational purposes only. Always conduct your own research or consult a financial advisor before making investment decisions.