There is no hiding place: leader of the graphic processing unit (GPU) Nvidia Eat is rival Advanced micro-apparents‘ (Dmla -8.74%)) Lunch in the space of the data center. However, investors do not always have to buy an industry leader to make a successful choice of shares, especially if a company also-group is negotiated with a significant discount.
A rising tide can really lift all the boats, and this is particularly true with Nvidia and AMD, because the major data centers operators do not want to lock themselves in a GPU provider. Nvidia recently made a daring prediction on the place where infrastructure expenses of the data center take place – expenses that will benefit both Nvidia and AMD. But the question remains: does AMD offer enough value to justify the purchase of its actions on Nvidia?
Nvidia predicts massive growth in data center spending
Nvidia focuses on Graphic processing units And the different software and technologies that support them. The AMD flea portfolio is much wider. It offers GPU offers that compete with NVIDIA, but also products such as integrated processors and processors (central processing units) for personal computers. Nvidia’s prediction is specifically for the data centers market, then ignore these other parts of AMD activities for the moment.
At his conference on the GTC A1 last month, the CEO of NVIDIA, Jensen Huang, said that infrastructure expenses of the data center should reach 1 dollars per year by 2028. Although Nvidia certainly does not obtain each dollar, by bringing about a quarter of it, because the income is not out of the question, because it is the share now. But what about AMD?
In 2024, AMD produced around $ 12.6 billion in data center income. On the other hand, during its financial year 2025 (which ended on January 26), the income from the Nvidia data center totaled $ 115 billion, so that AMD affairs are about a tenth of Nvidia. In this spirit, it will not be surprising that the annual sales of the AMD data center are approaching the 25 billion dollars mark over the next four years.
What are the implications of this? The total turnover of 12 months of AMD is today $ 25.8 billion. This would indicate that AMD revenues could increase considerably over the next four years, without including its customer growth (chips for personal computers), games (consoles and GPU chips designed specifically for game PCs) and integrated processors (specially designed processors). Although the sales of these divisions do not increase near the pace of data centers sales, they can always give a boost to AMD finances.
Although all this growth is a key element of the AMD investment thesis, the action is also fairly cheap at the moment.
AMD is negotiated at an average price on the market
Certain significant significant costs have affected AMD profits in the past 12 months, so the use of the price / profit ratio (P / E) of leakage to assess its stock at the moment would patch a less precise table. A better choice is to use your P / E shape.
AMD PE ratio (forward) data by Ycharts.
Trading at 22 times the long -term income, AMD is as cheap as in several quarters. In addition, it is essentially negotiated with the same evaluation as S&P 500which is valued at around 21 times the long -term income. However, if it benefits in proportion to the projected growth of the data centers market, this level would easily propel it to market yields.
And it’s just on the income side.
In the fourth quarter, its division of the data center displayed the second best operating margins of his four divisions.
| Division | Q4 Operational margin |
|---|---|
| Data center | 27.7% |
| Customer | 12.7% |
| Game | 11.2% |
| Integrated | 40% |
Data source: AMD.
If the growth of the data center exceeds these other divisions (in addition to integrating), the operating margin of AMD will increase, in which case its profits will increase more quickly than its income.
If this projection takes place, the punch of growth and the improvement of margins will transform AMD actions into a rocket, which makes today an excellent entry point. However, Huang’s projection is for 2028, so investors who buy now will have to be ready to keep AMD actions thanks to any short -term agitation that could occur along the way.
Keithen Drury has positions in Nvidia. The Motley Fool has positions and recommends micro advanced devices and Nvidia. The Word’s madman has a Disclosure policy.