AMD Is Now More Expensive Than Nvidia And Broadcom

AMD posted record Q2 revenue of $11.54B, up 50% year over year, driven by data-center demand, and management doubled its 2030 CPU total addressable market estimate to $220B, implying a 50% CAGR. EPS is forecast to grow at a 58.3% CAGR through 2028, but AMD's gross margins remain below Nvidia's and Broadcom's. The investment case is tempered by AMD's 72x P/E valuation, which exceeds both peer multiples and historical averages.

Analysis

AMD’s upside case now depends less on proving AI exposure and more on converting design wins into mix-driven gross-margin expansion. Data-center CPU share gains can support revenue growth, but the equity will not sustain a premium multiple if accelerator revenue carries lower initial margins, requires pricing concessions, or is offset by slower embedded/gaming recovery. The key quarterly proof points are data-center segment margin, MI-series shipment cadence, hyperscaler concentration, and whether operating leverage pushes incremental EBIT margins meaningfully higher.

Competitive dynamics favor AVGO as the lower-risk way to express sustained AI infrastructure spending: custom silicon and networking content can capture hyperscaler capex even where customers diversify away from merchant GPUs. NVDA remains the benchmark risk for AMD; any evidence that Nvidia’s platform lock-in or supply availability is improving reduces the urgency for customers to qualify AMD. Conversely, export restrictions or a renewed constraint in Nvidia supply could create a 1-3 quarter upside surprise for AMD, but that is a supply-dislocation trade rather than a durable share thesis.

Consensus appears to be underwriting a smooth multi-year earnings ramp while discounting execution risk embedded in a high starting valuation. At this multiple, even strong headline growth may be insufficient if forward gross-margin or EPS revisions fail to accelerate; the downside mechanism is multiple compression rather than an immediate revenue collapse. Falsify the cautious view if AMD delivers two consecutive quarters of upside to data-center revenue and raises full-year gross-margin guidance, demonstrating that AI mix is accretive rather than merely dilutive.

Key Decisions for Investors

• Prefer a 3-6 month pair: long AVGO / short AMD, sized beta-neutral. AVGO offers broader AI monetization through custom ASIC and networking, while AMD bears greater valuation and product-execution sensitivity; reassess if AMD raises gross-margin guidance or AVGO’s hyperscaler order visibility weakens.
• For existing AMD longs, retain only through the next earnings catalyst with a defined trim trigger if forward EPS estimates do not rise following results. A revenue beat without stronger gross-margin commentary is likely to produce limited upside and raises post-earnings de-rating risk.
• Use AMD call spreads rather than outright equity for a tactical upside expression into verified accelerator shipment data: target a 1-3 month tenor, financing the long call with an out-of-the-money short call. This limits exposure to valuation compression if operational progress is real but already priced.
• Monitor NVDA supply lead times, hyperscaler capex commentary, and AMD data-center gross margin as the decision dashboard. A material Nvidia supply loosening or AMD margin miss supports the AVGO-over-AMD pair; sustained supply tightness plus AMD margin expansion warrants closing the short leg.