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AMD P/E ratio is ~185 Nvidia P/E ratio is ~65 Yet I constantly hear how Nvidia is overvalued.

by betaby 2y ago

vardump 2y ago
I do think AMD has way more headroom to grow. So maybe that high P/E could have some justification.
- _huayra_ 2y ago
  The high P/E means that "room to grow" is already priced into the stock though.
ssijak 2y ago
That AMD P/E ratio is artificially high because of some accounting adjustments after a merger with some other company.
- metabagel 2y ago
  Xilinx, I guess, although I don't know how the accounting works on that.
  - JonChesterfield 2y ago
    Yeah, that was Xilinx. Bought with stock. I remember thinking the rise from $30 to $140 or so was way too fast so using the gain to acquire Xilinx looked great. It turned a huge gain on paper into a new division of the company with a track record of steadily printing money. It was totally lost on me that it would come at the price of literally years of people looking at P/E and declaring it too expensive. Company just put up ~7B in a quarter at 50% gross margin. Market cap is 240B. So about 9x a year's revenue, for a fabless semiconductor company. Looks crazy cheap to me, '132' P/E ratio and all.
RicoElectrico 2y ago
Ops margin for AMD is in 3-ish %, for Nvidia 63%. I wonder if that changes anything.
- QuarterReptile 2y ago
  It guarantees that Nvidia's margins will be shifting downward by painting the biggest target anyone has painted on his own back since the US in Desert Storm.
rileymat2 2y ago
It is very hard to have a discussion about under vs. overvalued, because it is all predicated on guesses of future performance if you are not stripping a company for its components in the short term. To try to play the anti-nvidia side, they are in a very good position now, but at 65 P/E where do they grow beyond the current frothy expectations so new investors can see stock price appreciation? Especially with companies seeing the profits desiring to compete. With AMD, you can see past performance with higher earnings and be optimistic that they can hit past earnings bringing the P/E ratio into alignment. That's the bear perspective.
airstrike 2y ago
Trailing P/E is about as informative as the tea leaves in your cup. You should ignore it. Looking at Morgan Stanley's estimates for NVDA, their base case values them at $150.00 12 months from now, which is ~42x CY25 EPS of $3.57. According to the same report, the mean consensus estimate is ~$137.88 which if you assume the same EPS, equates to ~38.6x (this is from an Aug 29, 2024 report, which came out after NVDA's latest earnings, as usual) For AMD, in the report that came out yesterday, the analysts values them at $169.00 which is ~43x FY2025 EPS of $3.94, below consensus estimates of $188.77 which imply a ~47.9x forward P/E ratio Now this comes with a bunch of caveats like the different dates, the fact that each analyst has their own view on forward EPS, the fact that I picked just a couple of reports instead of looking at all analysts, the different periods from AMD's FY 2025 vs. NVDA's CY 2025... but two things appear to remain true: (1) trailing PE multiples are useless and the sooner we stop mentioning them the better and (2) the discrepancy in multiples you pointed out doesn't hold up to scrutiny Diligencing the above caveats is left as an exercise to the reader
- dagmx 2y ago
  The irony is that forward P/E is more similar to reading the tea leaves in your cup: it’s speculation.
  - airstrike 2y ago
    Fair and perhaps that was a bad metaphor in hindsight... But at least it's more connected to the actual current value of the stock seeing that it is defined by future not past cash flows It doesn't matter if those are the right cash flows, you're really trading based on the market's expectations of those cash flows anyway
    - readthenotes1 2y ago
      "bad metaphor in hindsight" Clever! But it does make the opposition's point: while many will never acknowledge trouble in hindsight,it's much less common to acknowledge trouble in foresight ;)
NAHWheatCracker 2y ago
Nvidia is $3.42T market cap. AMD is $246B market cap. Nvidia makes up over 5% of the ETF I use. AMD is less than 0.5% There's a lot more wealth tied up in Nvidia, so there is more interest and worry. They are also more associated with hyped up tech like Bitcoin and AI. Whether you believe in those technologies in the long term determines whether you're likely to think Nvidia can maintain. With everyone dumping on Intel lately, AMD also looks like the primary CPU manufacturer.
- georgeecollins 2y ago
  Right! AMD could double its share of desktop / server CPUs without a huge change in the industry but its much harder for NVIDIA to double its revenue of GPU cards, AI chips. I have no idea what will happen, or what either is worth. But like Apple, at some point the market is the limiting factor, not the company.
- gizajob 2y ago
  It really is annoying me how much Nvidia is now tied up into almost every ETF, which means that it’s becoming “too big to fail” but also will drag things down horribly if it doesn’t keep delivering the huge earnings growth or suffers competition or AI doesn’t really deliver the goods in a meaningful way.
barumrho 2y ago
What can go up so quickly can also come down quickly. It's impressive that Nvidia has been delivering explosive growth in their earnings to match their valuation, but it is valid to be concerned whether the world can keep investing in GPUs like this sustainably.
qzw 2y ago
Well Nvidia is just 30 days away from going out of business.
metabagel 2y ago
AMD EV/EBITDA is 55.85 Nvidia EV/EBITDA is 54.64 https://www.investopedia.com/ask/answers/072915/how-can-evebitda-be-used-conjunction-pe-ratio.asp https://www.investopedia.com/ask/answers/072915/how-can-eveb... It seems like neither P/E ratio nor EV/EBITDA is a perfect measure. EV/EBITDA excludes capital expenses, but it also excludes amortization costs, which for AMD means the Xilinx acquisition.
- deleted 2y ago
  [deleted]
kjrfghslkdjfl 2y ago
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AMD P/E ratio is ~185 Nvidia P/E ratio is ~65 Yet I constantly hear how Nvidia is overvalued.

by betaby 2y ago

AMD P/E ratio is ~185 Nvidia P/E ratio is ~65 Yet I constantly hear how Nvidia is overvalued.

vardump 2y ago

I do think AMD has way more headroom to grow. So maybe that high P/E could have some justification.

_huayra_ 2y ago
The high P/E means that "room to grow" is already priced into the stock though.

ssijak 2y ago

That AMD P/E ratio is artificially high because of some accounting adjustments after a merger with some other company.

metabagel 2y ago
Xilinx, I guess, although I don't know how the accounting works on that.
- JonChesterfield 2y ago
  Yeah, that was Xilinx. Bought with stock. I remember thinking the rise from $30 to $140 or so was way too fast so using the gain to acquire Xilinx looked great. It turned a huge gain on paper into a new division of the company with a track record of steadily printing money. It was totally lost on me that it would come at the price of literally years of people looking at P/E and declaring it too expensive. Company just put up ~7B in a quarter at 50% gross margin. Market cap is 240B. So about 9x a year's revenue, for a fabless semiconductor company. Looks crazy cheap to me, '132' P/E ratio and all.

RicoElectrico 2y ago

Ops margin for AMD is in 3-ish %, for Nvidia 63%. I wonder if that changes anything.

QuarterReptile 2y ago
It guarantees that Nvidia's margins will be shifting downward by painting the biggest target anyone has painted on his own back since the US in Desert Storm.

rileymat2 2y ago

It is very hard to have a discussion about under vs. overvalued, because it is all predicated on guesses of future performance if you are not stripping a company for its components in the short term. To try to play the anti-nvidia side, they are in a very good position now, but at 65 P/E where do they grow beyond the current frothy expectations so new investors can see stock price appreciation? Especially with companies seeing the profits desiring to compete. With AMD, you can see past performance with higher earnings and be optimistic that they can hit past earnings bringing the P/E ratio into alignment. That's the bear perspective.

airstrike 2y ago

Trailing P/E is about as informative as the tea leaves in your cup. You should ignore it. Looking at Morgan Stanley's estimates for NVDA, their base case values them at $150.00 12 months from now, which is ~42x CY25 EPS of $3.57. According to the same report, the mean consensus estimate is ~$137.88 which if you assume the same EPS, equates to ~38.6x (this is from an Aug 29, 2024 report, which came out after NVDA's latest earnings, as usual) For AMD, in the report that came out yesterday, the analysts values them at $169.00 which is ~43x FY2025 EPS of $3.94, below consensus estimates of $188.77 which imply a ~47.9x forward P/E ratio Now this comes with a bunch of caveats like the different dates, the fact that each analyst has their own view on forward EPS, the fact that I picked just a couple of reports instead of looking at all analysts, the different periods from AMD's FY 2025 vs. NVDA's CY 2025... but two things appear to remain true: (1) trailing PE multiples are useless and the sooner we stop mentioning them the better and (2) the discrepancy in multiples you pointed out doesn't hold up to scrutiny Diligencing the above caveats is left as an exercise to the reader

dagmx 2y ago
The irony is that forward P/E is more similar to reading the tea leaves in your cup: it’s speculation.
- airstrike 2y ago
  Fair and perhaps that was a bad metaphor in hindsight... But at least it's more connected to the actual current value of the stock seeing that it is defined by future not past cash flows It doesn't matter if those are the right cash flows, you're really trading based on the market's expectations of those cash flows anyway
  - readthenotes1 2y ago
    "bad metaphor in hindsight" Clever! But it does make the opposition's point: while many will never acknowledge trouble in hindsight,it's much less common to acknowledge trouble in foresight ;)

NAHWheatCracker 2y ago

Nvidia is $3.42T market cap. AMD is $246B market cap. Nvidia makes up over 5% of the ETF I use. AMD is less than 0.5% There's a lot more wealth tied up in Nvidia, so there is more interest and worry. They are also more associated with hyped up tech like Bitcoin and AI. Whether you believe in those technologies in the long term determines whether you're likely to think Nvidia can maintain. With everyone dumping on Intel lately, AMD also looks like the primary CPU manufacturer.

georgeecollins 2y ago
Right! AMD could double its share of desktop / server CPUs without a huge change in the industry but its much harder for NVIDIA to double its revenue of GPU cards, AI chips. I have no idea what will happen, or what either is worth. But like Apple, at some point the market is the limiting factor, not the company.
gizajob 2y ago
It really is annoying me how much Nvidia is now tied up into almost every ETF, which means that it’s becoming “too big to fail” but also will drag things down horribly if it doesn’t keep delivering the huge earnings growth or suffers competition or AI doesn’t really deliver the goods in a meaningful way.

barumrho 2y ago

What can go up so quickly can also come down quickly. It's impressive that Nvidia has been delivering explosive growth in their earnings to match their valuation, but it is valid to be concerned whether the world can keep investing in GPUs like this sustainably.

qzw 2y ago

Well Nvidia is just 30 days away from going out of business.

metabagel 2y ago

AMD EV/EBITDA is 55.85 Nvidia EV/EBITDA is 54.64 https://www.investopedia.com/ask/answers/072915/how-can-evebitda-be-used-conjunction-pe-ratio.asp https://www.investopedia.com/ask/answers/072915/how-can-eveb... It seems like neither P/E ratio nor EV/EBITDA is a perfect measure. EV/EBITDA excludes capital expenses, but it also excludes amortization costs, which for AMD means the Xilinx acquisition.

deleted 2y ago
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kjrfghslkdjfl 2y ago

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