It goes up, but by far less than Nvidia’s. Additionally, AMD has growth drivers in other segments that will help offset the AI loss. Nvidia has nothing else that could meaningfully offset their AI loss meaning the forward looking P/E path for NV would be way worse than AMD’s compared to where they are today.
It goes up, but by far less than Nvidia’s. Additionally, AMD has growth drivers in other segments that will help offset the AI loss. Nvidia has nothing else that could meaningfully offset their AI loss meaning the forward looking P/E path for NV would be way worse than AMD’s compared to where they are today.
The E part is the one you are ignoring. For AMD, the E (Earnings) would not change by very much, because AMD is not "earning" very much from AI (yet).
For NVidia the E part would collapse with both revenue and profit margins cratering.
The one that has a 115.42 P/E ratio based on promise that they can capture some AI revenue.
No. The PE ratio of AMD will tank in that scenario.
What do people not get here? AMD has a 115.42 P/E ratio compared to Nvidia's 53.
Both company's stocks are equally exposed to AI. AMD because of its AI promise. Nvidia because of both AI promise and complete dominance.
Let's suppose both AMD and Nvidia drop to 15 P/E ratio. AMD would drop by 7.6x. Nvidia would only drop 3.5x.
Nvidia's non-AI business is also bigger than AMD's non-AI business.
Except that AMD only has a 115 P/E ratio because of AI hype.
If AMD had a P/E ratio of 15 (no growth, stable business), their stock price would be $30 compared to $230 now.
AMD's stock price is dependent entirely on its AI promise. Without that, it would collapse.
And as mentioned, in any AI collapse, companies will stop buying AMD AI chips because better Nvidia chips would suddenly have supply.
In the hypothetical that AI revenue suddenly disappears, it goes up, then the market reacts based on the new P/E ratio to adjust the price to whatever it thinks is fair given the new revenue and outlook.
It doesn't go up. It's going to drop in that scenario because AMD stock price will drop. You don't need to wait for earnings to come out in 3 months to have the PE ratio drop. 🤦♂️
AMD PE ratio based on current quarter is 233 / 4.8 = 58.25
Only about 17.5% of those earnings are at risk (to AI bubble bursting)
NVidia PE ratio based on the last quarter 188 / 4.20 = 44.78
But ~90% of the earnings are at risk.
BTW, you are continuing to ignore the Earnings. Suppose both companies' stocks do drop to 15 P/E ratio, but also, their earnings drop as profits from AI disappear.
AMD earnings drop 17.5% from $4.80 annualized = $3.96. Multiplied by 15 = $59.40
NVDA earnings drop of 90% from $4.20 annualized = $0.42. Multiplied by 15 = $6.30
It's a hypothetical analysis starting from the basis of AI revenue going to 0. The instantaneous P/E goes up and then the market reacts. The end result is the same and if you want to start the analysis after the expected market adjustments or at the moment of hypothetical revenue drop doesn't make a difference and is simply a game of semantics.
If you are talking speculation, then you should look at forward P/E but if you want to strictly look at current P/E, then AMD is priced to roughly double their current earnings compared in relation to NV's P/E ratio (trailing 12 month P/E which is not the best metric for a growth stock but I'm being generous to your argument). If even half of AI goes away, NV's revenue gets cut almost in half and their earnings drop even more because NV's margins would go down significantly as well. AMD's revenue drops by roughly 10% but margins actually improve because their DCAI products have significantly less margin than their company average so the effect on earnings from loss of DCAI revenue is actually mitigated by increased margins even without growth in other segments.
So, all of a suddent the ~2X difference in P/E between NV and AMD becomes roughly a wash with the change in earnings. Then compare the growth outlook with a stagnant AI market and NV has no growth to look forward to but AI is now only 10% of AMD's revenue and is still experiencing growth in their gaming, client, and DC-CPU segments to drive future revenue growth with increased earnings leading to a lower forward P/E than NV. So, in the case of an AI bubble pop, unless NV can find additional revenue in other segments with extremely high margins, they face a much harsher drop in market value than AMD once the dust settles.
sandorski
No Lifer
- Oct 10, 1999
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If the AI bubble pops and AMD gets caught up in the crash in an equivalent fashion, AMD stock becomes a bargain. It will recover much sooner as traders realize AMD wasn't that exposed. I suspect though that traders mostly know this and this discussion is just a chip on a shoulder.
From the 10-Q...
I do sort of wonder if the Gaming revenue was based upon Sony building up supply, thinking that they would sell a bunch of consoles between now and GTA 6's now delayed release which was supposed to be May.
I do sort of wonder if the Gaming revenue was based upon Sony building up supply, thinking that they would sell a bunch of consoles between now and GTA 6's now delayed release which was supposed to be May.
Inventories of console chips were at a low point in Q1 2025. Q2 and Q3 sales were surprisingly high. AMD is expecting a big drop in Q4.
Maybe part of it but I am a bit doubtful it is the primary cause. I think it’s more that Sony and MS had more inventory than they needed for a while and dropped their orders to near 0 for a while. That inventory is now cleared and they needed more for the coming holiday season.
adroc_thurston
Diamond Member
- Jul 2, 2023
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Oh no my child, that was backpedaling.
It's his dumbass CFO that said the quite part out loud. Too bad!
How many times does it need to be repeated that AMD's market cap is what it is today because of AI expectation?
adroc_thurston
Diamond Member
- Jul 2, 2023
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It doesn't matter what their market cap is.
The relevant stuff is on the balance sheet and there you have growth across every BU (sans embedded).
And Nvidia's non-AI business is bigger than AMD's non-AI business and growing faster as well.
Market cap is all that matters.
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adroc_thurston
Diamond Member
- Jul 2, 2023
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No?
Most of the networking rev is also tied up in ML capex.
That leaves auto (they got gank'd by QCOM of all people there), gaming (stable) and proviz (dead meme market).
adroc_thurston
Diamond Member
- Jul 2, 2023
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No.
AMD sans ML slop is like 7.5B this Q which is a fair bit above this.
I'm sure even Jensen himself knows the AI bubble will burst eventually. Just have to keep selling the hype until then.
He's probally long onto the next thing to hype.
He's probally long onto the next thing to hype.
Part of NVidia "Gaming" is also AI. Could be easily 1/3 of the gaming
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They are trying to push into robotics as the next thing from what I can tell.
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