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> 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 everyt

by 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.

by Jalad 2y ago

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.