August 4 is an important date for AMD (NASDAQ: AMD) and Nvidia (NASDAQ: NVDA) is the same. That’s when AMD reports second-quarter earnings, and it has major implications for both companies’ stocks.
It’s entirely possible that the two companies’ stocks could move in opposite directions following this announcement, and each group of investors (perhaps you’re invested in both stocks) should be prepared for that.
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AMD needs to exceed expectations
AMD is obviously a major stock impacted by its own earnings report and has a lot to prove this quarter. Wall Street analysts expect revenue to rise 47% to $11.3 billion this quarter, up from $10.3 billion in the first quarter, when the company reported 38% growth. However, meeting expectations will likely not be enough for AMD. In 2026, AMD shares fell sharply. They’re up more than 130% so far, with much of that growth coming in the last few months since the company reported first-quarter earnings. There are high expectations for AMD to deliver huge revenue and profit growth, and if AMD doesn’t deliver on that, the stock could fall due to high expectations.
This is reflected in AMD’s forward price/earnings (P/E) ratio, as the company’s share price trades at nearly 75 times forward earnings.
AMD PE Ratio Data (Forward) from YCharts
That’s a hefty premium for any stock, and AMD has high hopes of living up to it. For the market to be satisfied with AMD’s results, it will likely have to raise its forecast and crush expectations for the current quarter. Keeping investors informed about GPU supplies coming to China will also be a huge boost. Finally, AMD’s profitability should improve. If investors get bad news on any of these fronts, the stock could be poised for a sell-off, as most big AI tech companies are trading at around 30 times forward earnings at most.
There are a lot of things that need to be right for AMD, which makes the stock a little iffy to invest in before it reports earnings.
Nvidia needs confirmation of demand
In some ways, the market has become irrational about AMD and Nvidia stocks. While AMD is valued at a large premium, Nvidia trades at just 24 times forward earnings. It is valued at this level despite growing much faster than AMD.
AMD Revenue Data (QoQ YoY Growth) from YCharts
This trend is expected to continue until at least the second quarter, with analysts expecting almost 100% growth from Nvidia in the second quarter. Since Nvidia is expected to grow at a faster rate, it may seem strange that it has a lower valuation, but that’s how the market values the stock. The main concern for Nvidia stock is what data center demand will look like over the next few years. If AMD posts strong results and indicates that AI hyperscalers are placing even more orders than expected, Nvidia stock could skyrocket because it’s confirmation of the demand the market has been waiting for.
We’ll see what happens to these two stocks after AMD’s announcement, but I think a bad quarter for AMD could sink both stocks, while an expected quarter could sink AMD but leave Nvidia stock flat. Overall, I think Nvidia is a much better value here and there is potential for an even bigger reward due to its lower valuation compared to AMD. Both companies are still worth keeping an eye on, but I think Nvidia is the only company worth investing in at this time due to its higher expected growth and much lower valuation. AMD is by no means a bad company, but its stock has significantly outperformed 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 disclosure policy.
Nvidia and AMD investors should be ready by August 4th. Originally published by The Motley Fool.