Nvidia and AMD Investors Must Be Prepared for Aug. 4
Key Points
Aug. 4 is a major date for AMD (NASDAQ: AMD) and Nvidia (NASDAQ: NVDA) investors alike. It’s when AMD reports second-quarter earnings, and it has major implications for both stocks.
It’s possible that the two stocks could move in opposite directions after this announcement, and each group of investors (maybe you’re invested in both stocks) needs to be prepared.
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AMD needs to blow expectations out of the water
AMD is obviously the primary stock affected by its own earnings report, and it has a lot to prove this quarter. Wall Street analysts expect 47% revenue growth to $11.3 billion this quarter, up from $10.3 billion in Q1 when it posted 38% growth. However, meeting expectations likely won’t be good enough for AMD. AMD’s stock has been on an absolute tear in 2026. It’s up more than 130% so far, with a vast majority of that rise coming during the past few months since it reported Q1 earnings. There are high expectations for AMD to deliver huge revenue and profit growth, and if AMD doesn’t deliver, the stock could slip based on elevated expectations.
This is reflected in AMD’s forward price-to-earnings (P/E) ratio, as it trades for almost 75 times forward earnings.
AMD PE Ratio (Forward) data by YCharts
That’s a major premium for any stock, and AMD has high expectations to live up to. For the market to be satisfied with AMD’s results, it will likely need to raise its forecast and blow current quarter expectations out of the water. Informing investors of GPU shipments to China would also be a huge boost. Lastly, AMD’s profit margins need to expand. If investors receive bad news on any of these fronts, the stock could be ripe for a sell-off, as most big tech companies involved in the AI build-out trade for a maximum of about 30 times forward earnings.
There are a lot of things that need to go right for AMD, making the stock a bit precarious to invest in before it reports earnings.
Nvidia needs confirmation of demand
In some ways, the market has become irrational in how it’s treating AMD’s and Nvidia’s stocks. While AMD is valued at a major premium, Nvidia trades for a mere 24 times forward earnings. It’s valued at this level despite growing much faster than AMD.
AMD Revenue (Quarterly YoY Growth) data by YCharts
That trend is expected to last through at least Q2, with analysts expecting nearly 100% growth from Nvidia during Q2. With Nvidia expected to grow at a faster pace, it may seem odd that it has the lower valuation, but that’s how the market is pricing the stock. The primary concern with Nvidia’s stock is what data center demand will look like during the next few years. If AMD posts strong results and indicates that AI hyperscalers are placing even more orders than expected, then Nvidia stock could skyrocket, because that’s the demand confirmation the market has been waiting for.
We’ll see what happens with these two stocks after AMD’s announcement, but I think a bad quarter for AMD could sink both stocks, while an as-expected quarter could sink AMD but leave Nvidia’s stock unaffected. Overall, I think Nvidia is the much better value here, and there is the potential for an even greater reward due to its cheaper valuation versus AMD’s. Both are still worth following, but I think Nvidia is the only one worth investing in at this time due to its higher expected growth and a much lower valuation. AMD isn’t a bad company by any means, but its stock has gotten far ahead of its business.
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Keithen Drury has positions in Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
