NVDA v AMD: a bet from last year

I have a close friend who is a software engineer. I have known him since we were kids, and I will call him John to protect his identity. Last year we were talking about NVDA and AMD. John owned AMD and I owned NVDA. The date was 6/21/2017. AMD was at $14.00 and NVDA was at $158.95.

I suggested to John that he sell his AMD shares and put the money into NVDA. Being a software engineer, John believed that he had more knowledge about this matter than I did. He was convinced that AMD was a better investment and that AMD was going to do better than NVDA. I said that in 2 years (which would be 6/21/2019) NVDA would outperform AMD. Interestingly, part of what influenced him is the share prices. AMD was trading at $14 and NVDA was trading at about $160 so AMD must be a better deal, right? I’ve tried to explain the concept of market cap and P/E and competitive advantage and financial statements to John. All of this didn’t matter because AMD was at $14 and NVDA was at $160 which was just too expense compared to AMD. And John was a mathematics major in college.

We are not yet one year into the 2-year bet.

AMD is down 12.1%
NVDA is up 61.5%
This 73.6% difference does not include the 3 paid and 1 declared dividends from NVDA.

At this point, I would be willing to double down on this bet of course picking NVDA to outperform for the next two years from today.

Chris

16 Likes

I’ll take that bet.

Not that I don’t like Nvidia - I do. But I think we have an overbought situation at Nvidia. People are going to be willing to take profit, and the smallest misstep will cause a lot of bloodletting. I’d rather buy on a pullback - sometimes I get it, sometimes I miss it, but on this Nvidia I think the risk/reward profile is better to be cautious.

AMD is the reverse. It is in a turn around situation, and has been doing everything right in the last 6 months. The new CEO is making all the right moves. Intel has stumbled, giving Nvidia a better opportunity in the x86 space. Intel is also partnering big time on gaming chips, providing an opportunity to take market share from Nvidia. AMD is oversold - anything positive will move the stock up, and there is still a lot of short activity - 20% of the float is shorted, according to MarketWatch.

If you want to talk 5 yrs, I’m not sure which I would choose, but for 2 yrs, I’ll definitely go with AMD

5 Likes

AMD is the reverse. It is in a turn around situation

Seems this has always been the case for AMD since the 90s. But take a look at that chart. History is not on your side.

Greg, long NVDA