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AMD is probably undervalued, but Nvidia is clearly way overvalued. I don't think the reckoning will come from AMD stealing Nvidia's market share, it'll come wh

AMD is probably undervalued, but Nvidia is clearly way overvalued. I don't think the reckoning will come from AMD stealing Nvidia's market share, it'll come when the hype bubble collapses and businesses start treating neural networks like commodities, running whatever is cheapest instead of the absolute most powerful. AMD is in a great position, because they make both great GPU/NPU hardware and great CPU hardware.

Jalad 2y ago
> AMD is probably undervalued, but Nvidia is clearly way overvalued. AMD trades at a price to earnings ratio of 99, NVDA trades at a PE of ~38. PE isn't everything when looking at companies, but I don't see other reasons to think AMD is undervalued
- ein0p 2y ago
  That's because the market believes AMD will eventually get its head of its ass on GPUs and start to grow in that segment. Once it starts to grow there, that PE will go up even higher.
- hmm37 2y ago
  AMD's PE ratio looks high because of their Xilinx acquisition and for tax reasons. You have to look at non-GAAP numbers instead, e.g. AMD's forward PE ratio which is only ~20 or so. Nvidia's forward PE is ~30.
  - empiricus 2y ago
    just bought a little amd with zero dilligence, and now i see they aquired xilinx? why would anyone do that... remorse.
    - littlestymaar 2y ago
      The acquisition was announced 4 and a half years ago[1] and finalized 3 years ago so it's not like it's a recent thing. [1]: https://ir.amd.com/news-events/press-releases/detail/977/amd-to-acquire-xilinx-creating-the-industrys-high https://ir.amd.com/news-events/press-releases/detail/977/amd...
    - transpute 2y ago
      Isn't Xilinx the origin of "AI NPU" in AMD Ryzen?
- deadbabe 2y ago
  Is PE even anything? If you guided your investing based on sane PE ratios for the past decade you would have been consistently unhappy with missing out on huge gains in tech companies.
  - georgeecollins 2y ago
    In the long run, I believe yes. PE also would not have been helpful in the late 1920s or late 1990s. But things tend to revert. One of the reasons why different companies have different p/e for a long time is expectation of growth. So META has had a pretty high P/E, but then E has been growing really fast. GM's earnings don't grow so past so the P/E is low. And capital efficiency also hurts P/E. Disclaimer: I believe stocks represent fractional ownership of an actual company and are ultimately (but not always) valued as such. You can make an argument that financial instruments are just driven by sentiment, supply and demand, and have no correlation to actual reality.
  - Jalad 2y ago
    Agreed, but I don't think that's a good use for PE. PE is useful for comparisons between similar companies, not as an absolute yardstick
  - smallmancontrov 2y ago
    PE is appropriate for companies going steady. It's not appropriate for companies that are growing or dying. Thought experiment: A and B have the same earnings per share, but everyone expects A to double its revenue going forward and B to go steady. Should shares of A go for the same price as shares of B? If you think so, I can front-run you. Thought experiment 2: A and B have the same earnings per share, but everyone expects A to halve its revenue going forward and B to go steady. Should they go for the same price? If you think so, I have some bags for you to hold. The easy answer is that PEG is more appropriate for growing companies and PB is more appropriate for dying companies (since this is HN, I'll also mention that "Team and TAM" is the metric for seed stage). The hard answer is that there is no substitute for modeling the finances of the company and applying a DCF, but your brokerage app can't do that for you so PE/PEG/PB still have their place.
  - 2y ago
- light_hue_1 2y ago
  That's too shortsighted. Keep in mind that Nvidia gets to charge astronomical prices because AMD's software is crap. Nvidia charges 2-5x as much for equivalent or worse hardware compared to what AMD is selling. That PE ratio will collapse if AMD ever manages to get its act together. I'm still astounded AMD has no fired every executive from the CEO down for this obvious multi-year failure.
rapsey 2y ago
> but Nvidia is clearly way overvalued. No it is not actually. They are making insane amounts of money and have very strong forward guidance. With the drop in the last month it is actually cheap (low peg ratio). When the market turns, nvidia is likely to soar once again.
ein0p 2y ago
> Nvidia is clearly way overvalued Tell me you haven't looked at Nvidia's financials (especially the margins) without telling me. It basically prints money, now and in the foreseeable future, and all of its products are permanently sold out, even at the insane prices Nvidia is charging.
- eightysixfour 2y ago
  > foreseeable future I think this is the arguable part. The more AI compute becomes valuable, the more reason there is to divest from their software moat. Their hardware is good, but not unassailable. I think their modest (by tech hype standards) P/E is recognition of this.
  - rapsey 2y ago
    They modest P/E ratio is a consequence of growing their earnings so much.
    - eightysixfour 2y ago
      And yet, when other companies have grown their earnings like mad, their price has outgrown it, driving their P/E up further, because the market expects higher future earnings. nvidia is reaping the rewards of the things built up to now, but isn't necessarily expected to continue to hockey stick. Their P/E is approximately the same as the rest of the S&P 500 technology sector's average.
    - georgeecollins 2y ago
      And also there is some recognition that its going to get really hard to grow them as much proportionately. AMD could increase its earnings a lot pretty quickly, but its hard for NVIDIA to grow like that for the same reasons it is hard for Apple to grow. You are already getting so many of the $ available to spend in that area.
  - baal80spam 2y ago
    But they are making strides in robotics already. Jensen is super smart, business-savvy AND hard-working. These are some of many reasons I own NVDA.
solumunus 2y ago
NVDA is valued more appropriately than AMD. NVDA’s valuation based on forward earnings is high, but there are many more extreme examples including AMD.
formerly_proven 2y ago
Nvidia is imho kind of a resurgence of large scale 90s Unix systems (ala SGI) [1], and not just by pricing and looks but also if you look at the vertical integration. I think this kind of business setup is more vulnerable to competition from below than people like to think, and it really only takes 1-2 product misses for a big shakeup. [1] Co-developed proprietary software stacks running on highly proprietary and non-standard hardware targeting very specific workloads.
xnx 2y ago
Is it possible someone will write a CUDA to AMD/Tensor/whatever transpiler (high-level emulator? I'm not sure of the right term) I thought there were a remarkably small number of ops that GPUs perform. Seems like a very high premium to pay for not wanting to rewrite in JAX or whatever.
- drexlspivey 2y ago
  AMD hired 1 guy to do it and then fired him
  - xnx 2y ago
    I wondered if John Carmack would take his strong knowledge of low level hardware and interest in AI and work on this, but he seems to be working on a non LLM flavor of AI.
    - newsclues 2y ago
      Or Abrash?
    - bayindirh 2y ago
      From his talks, he never liked AMD/ATI hardware. Doom 3 code was infamously NVIDIA optimized, since he liked the hardware more.
- smallmancontrov 2y ago
  Lack of translation layer wasn't the problem, AMD's shit being completely broken (for this purpose) was the problem. Driver-level broken, possibly hardware-level broken. Black screens, restarts, wrong answers, threads full of people shouting into the void year after year about the same behavior before seeing the light and buying nvidia. Then NVDA pumped by trillions and AMD did not and even AMD's crack team of trained denial specialists could no longer stay the course, so they started to turn the ship. But that was only a year or two ago and even the tiniest changes take years in hardware land so the biggest sins are still baked in to the latest chips, but at least the software has started to suck a bit less. I no longer see 100% of the people who try to build on AMD compute run away screaming. Many do, but not all. That's a change, an important and positive one. If AMD keeps it up maybe they can save us from 80% margins on matrix multiplication after all.
ZeroTalent 2y ago
NVIDIA is one of the most undervalued companies in the SPX looking at fundamentals, even disregarding what they are planning next (subscription services for CUDA, and humanoids, etc). Take a look at their last quarter's income statement graph: https://i.imgur.com/mQwZ5o4.png https://i.imgur.com/mQwZ5o4.png - Once in a few years I see a Sankey graph looking like that. And it's only growing over the last 10 years.
Jlagreen 2y ago
The way I see it is that Nvidia might reacht $1 trillion in revenue before AMD reaches $100 billion in revenue. So the upside in revenue growth is higher for Nvidia. People think that because a company has grown very large very quickly that it can't grow as much anymore. But on the other hand, there is clear evidence that Nvidia continues to dominate AMD's offerings despite the latter having a competitive product now. So the metric for Nvidia isn't Nvidia vs. AMD but the growth aspect of AI market overall.

Jalad 2y ago

> AMD is probably undervalued, but Nvidia is clearly way overvalued. AMD trades at a price to earnings ratio of 99, NVDA trades at a PE of ~38. PE isn't everything when looking at companies, but I don't see other reasons to think AMD is undervalued

ein0p 2y ago
That's because the market believes AMD will eventually get its head of its ass on GPUs and start to grow in that segment. Once it starts to grow there, that PE will go up even higher.
hmm37 2y ago
AMD's PE ratio looks high because of their Xilinx acquisition and for tax reasons. You have to look at non-GAAP numbers instead, e.g. AMD's forward PE ratio which is only ~20 or so. Nvidia's forward PE is ~30.
- empiricus 2y ago
  just bought a little amd with zero dilligence, and now i see they aquired xilinx? why would anyone do that... remorse.
  - littlestymaar 2y ago
    The acquisition was announced 4 and a half years ago[1] and finalized 3 years ago so it's not like it's a recent thing. [1]: https://ir.amd.com/news-events/press-releases/detail/977/amd-to-acquire-xilinx-creating-the-industrys-high https://ir.amd.com/news-events/press-releases/detail/977/amd...
  - transpute 2y ago
    Isn't Xilinx the origin of "AI NPU" in AMD Ryzen?
deadbabe 2y ago
Is PE even anything? If you guided your investing based on sane PE ratios for the past decade you would have been consistently unhappy with missing out on huge gains in tech companies.
- georgeecollins 2y ago
  In the long run, I believe yes. PE also would not have been helpful in the late 1920s or late 1990s. But things tend to revert. One of the reasons why different companies have different p/e for a long time is expectation of growth. So META has had a pretty high P/E, but then E has been growing really fast. GM's earnings don't grow so past so the P/E is low. And capital efficiency also hurts P/E. Disclaimer: I believe stocks represent fractional ownership of an actual company and are ultimately (but not always) valued as such. You can make an argument that financial instruments are just driven by sentiment, supply and demand, and have no correlation to actual reality.
- Jalad 2y ago
  Agreed, but I don't think that's a good use for PE. PE is useful for comparisons between similar companies, not as an absolute yardstick
- smallmancontrov 2y ago
  PE is appropriate for companies going steady. It's not appropriate for companies that are growing or dying. Thought experiment: A and B have the same earnings per share, but everyone expects A to double its revenue going forward and B to go steady. Should shares of A go for the same price as shares of B? If you think so, I can front-run you. Thought experiment 2: A and B have the same earnings per share, but everyone expects A to halve its revenue going forward and B to go steady. Should they go for the same price? If you think so, I have some bags for you to hold. The easy answer is that PEG is more appropriate for growing companies and PB is more appropriate for dying companies (since this is HN, I'll also mention that "Team and TAM" is the metric for seed stage). The hard answer is that there is no substitute for modeling the finances of the company and applying a DCF, but your brokerage app can't do that for you so PE/PEG/PB still have their place.
- 2y ago
light_hue_1 2y ago
That's too shortsighted. Keep in mind that Nvidia gets to charge astronomical prices because AMD's software is crap. Nvidia charges 2-5x as much for equivalent or worse hardware compared to what AMD is selling. That PE ratio will collapse if AMD ever manages to get its act together. I'm still astounded AMD has no fired every executive from the CEO down for this obvious multi-year failure.

rapsey 2y ago

> but Nvidia is clearly way overvalued. No it is not actually. They are making insane amounts of money and have very strong forward guidance. With the drop in the last month it is actually cheap (low peg ratio). When the market turns, nvidia is likely to soar once again.

ein0p 2y ago

> Nvidia is clearly way overvalued Tell me you haven't looked at Nvidia's financials (especially the margins) without telling me. It basically prints money, now and in the foreseeable future, and all of its products are permanently sold out, even at the insane prices Nvidia is charging.

eightysixfour 2y ago
> foreseeable future I think this is the arguable part. The more AI compute becomes valuable, the more reason there is to divest from their software moat. Their hardware is good, but not unassailable. I think their modest (by tech hype standards) P/E is recognition of this.
- rapsey 2y ago
  They modest P/E ratio is a consequence of growing their earnings so much.
  - eightysixfour 2y ago
    And yet, when other companies have grown their earnings like mad, their price has outgrown it, driving their P/E up further, because the market expects higher future earnings. nvidia is reaping the rewards of the things built up to now, but isn't necessarily expected to continue to hockey stick. Their P/E is approximately the same as the rest of the S&P 500 technology sector's average.
  - georgeecollins 2y ago
    And also there is some recognition that its going to get really hard to grow them as much proportionately. AMD could increase its earnings a lot pretty quickly, but its hard for NVIDIA to grow like that for the same reasons it is hard for Apple to grow. You are already getting so many of the $ available to spend in that area.
- baal80spam 2y ago
  But they are making strides in robotics already. Jensen is super smart, business-savvy AND hard-working. These are some of many reasons I own NVDA.

solumunus 2y ago

NVDA is valued more appropriately than AMD. NVDA’s valuation based on forward earnings is high, but there are many more extreme examples including AMD.

formerly_proven 2y ago

Nvidia is imho kind of a resurgence of large scale 90s Unix systems (ala SGI) [1], and not just by pricing and looks but also if you look at the vertical integration. I think this kind of business setup is more vulnerable to competition from below than people like to think, and it really only takes 1-2 product misses for a big shakeup. [1] Co-developed proprietary software stacks running on highly proprietary and non-standard hardware targeting very specific workloads.

xnx 2y ago

Is it possible someone will write a CUDA to AMD/Tensor/whatever transpiler (high-level emulator? I'm not sure of the right term) I thought there were a remarkably small number of ops that GPUs perform. Seems like a very high premium to pay for not wanting to rewrite in JAX or whatever.

drexlspivey 2y ago
AMD hired 1 guy to do it and then fired him
- xnx 2y ago
  I wondered if John Carmack would take his strong knowledge of low level hardware and interest in AI and work on this, but he seems to be working on a non LLM flavor of AI.
  - newsclues 2y ago
    Or Abrash?
  - bayindirh 2y ago
    From his talks, he never liked AMD/ATI hardware. Doom 3 code was infamously NVIDIA optimized, since he liked the hardware more.
smallmancontrov 2y ago
Lack of translation layer wasn't the problem, AMD's shit being completely broken (for this purpose) was the problem. Driver-level broken, possibly hardware-level broken. Black screens, restarts, wrong answers, threads full of people shouting into the void year after year about the same behavior before seeing the light and buying nvidia. Then NVDA pumped by trillions and AMD did not and even AMD's crack team of trained denial specialists could no longer stay the course, so they started to turn the ship. But that was only a year or two ago and even the tiniest changes take years in hardware land so the biggest sins are still baked in to the latest chips, but at least the software has started to suck a bit less. I no longer see 100% of the people who try to build on AMD compute run away screaming. Many do, but not all. That's a change, an important and positive one. If AMD keeps it up maybe they can save us from 80% margins on matrix multiplication after all.

ZeroTalent 2y ago

NVIDIA is one of the most undervalued companies in the SPX looking at fundamentals, even disregarding what they are planning next (subscription services for CUDA, and humanoids, etc). Take a look at their last quarter's income statement graph: https://i.imgur.com/mQwZ5o4.png https://i.imgur.com/mQwZ5o4.png - Once in a few years I see a Sankey graph looking like that. And it's only growing over the last 10 years.

Jlagreen 2y ago

The way I see it is that Nvidia might reacht $1 trillion in revenue before AMD reaches $100 billion in revenue. So the upside in revenue growth is higher for Nvidia. People think that because a company has grown very large very quickly that it can't grow as much anymore. But on the other hand, there is clear evidence that Nvidia continues to dominate AMD's offerings despite the latter having a competitive product now. So the metric for Nvidia isn't Nvidia vs. AMD but the growth aspect of AI market overall.