AMD Outperforming NVIDIA: What's Behind It and Can It Continue?

Earlier this year, NVIDIA Corp. (NASDAQ: NVDA) became the world’s first $4 trillion company, rising to the top of the Magnificent Seven on the back of a 30% year-to-date (YTD) gain. Few companies have become more synonymous with artificial intelligence than NVIDIA, and investors certainly aren’t crying poor over a 30% gain in just seven months.

However, NVIDIA’s stock is no longer leading the pack in the semiconductor sector thanks to a meteoric rise from Advanced Micro Devices Inc. (NASDAQ: AMD), whose shares are up more than 45% so far this year and more than 80% in the last three months alone. Today, we’ll discuss why AMD shares have outpaced NVDA so far in 2025 and look for any hints from the market on whether this outperformance can continue.

NVDA Hit by Regulatory Headwinds, But That Doesn’t Explain Underperformance

If you’re in the market for Graphics Processing Units (GPUs), there’s a good chance you’re sourcing from NVIDIA, which controls a stunning 92% of the market share for desktop and laptop GPUs, and 80% of the chips used for AI training. AMD GPUs make up most of the remaining 8% of that share, a number that’s dropped from 15% in Q4 2024. But despite NVDA increasing its GPU share lead, its stock has fallen behind AMD’s.

One reason for NVDA’s slump in the first half of 2025 was regulatory pressure beyond its control. When President Trump launched his first trade war salvo at China, NVIDIA chips were one of the initial casualties. Export controls banned shipments of the company’s H20 units to China from April until July, resulting in a $4.5 billion excess inventory charge in its Q1 earnings.

AMD also received an $800 million excess inventory charge due to export controls, and now Trump has relented, allowing chips to once again flow into China. While NVIDIA took the larger hit since its chips are more specialized and expensive, it's hard to pinpoint regulatory issues as the sole reason for AMD’s outperformance, especially since AMD shares have widened the gap in the last few weeks. 

AMD’s Diverse Pipeline Provides Opportunities for Growth

If you come at the king, you best not miss, and AMD is deploying a larger product pipeline than NVIDIA to enhance its growth prospects. Tech sector superscalers are naturally wary of becoming too dependent on a single company or product line in their AI projects, and AMD’s MI300 chips quickly achieved $1 billion in sales in just two quarters. In Q1 2025, AMD reported 57% year-over-year (YOY) revenue growth in its Data Center segment, primarily through sales of its EPYC server CPUs and Instinct GPUs to AI developers like OpenAI.

It also posted 68% YOY growth in its Client segment for laptops and desktops thanks to increased adoption of its Zen 5 chips.

AMD is also spending cash on investments and acquisitions. The company paid $4.9 billion to purchase AI infrastructure provider ZT Systems and has also invested in AI startups like Vultr. While NVIDIA isn’t exactly laying low with its Blackwell superchips now in production, it lacks AMD’s pipeline diversity, which could put AMD in a position to reclaim some market share.

NVIDIA Revenue and Margins Still Industry Best, But Sky-High Expectations Limiting Stock 

When NVDA reports earnings, the entire market pays attention. The revenue figures the company reports each quarter continue to defy analysts' expectations.

Posting $40 billion in quarterly sales would’ve seemed inconceivable as little as five years ago, and now it’s a number that doesn’t even move the stock after hours.

NVDA reported $44.06 billion in quarterly revenue on May 28, which beat expectations by nearly $1 billion and represented 69.2% YOY growth. The data center segment drew $39 billion, a 73% YOY advance and gross margins were 61% even with the $4.5 billion inventory charge.

AMD reported $7.44 billion in its Q1 2025 earnings release on May 6, a 36% year-over-year increase. In addition to the data center revenue surge, the struggling Client and Gaming segment also reported 28% year-over-year revenue growth.

The company guided a 43% gross margin for its Q2 2025 earnings, which will be released after the market closes on August 5. What do you notice about these numbers? All of these are inferior to NVIDIA’s, from total revenues to growth rates to margins.

Despite these numbers, AMD shares are outpacing NVDA’s, which shows how high expectations have gotten for the first $4 trillion company.

The first half of 2025 has shown the market that there’s room for two sheriffs in this town. AMD’s outperformance so far is likely a combination of factors: less negative impact from export controls and tariffs, a wider product pipeline, and lower earnings expectations.

NVDA’s heavier reliance on Chinese exports could result in future problems should Trump crank up the trade war heat again, a scenario that may presently be priced into both stocks. However, despite the near-impossibly high bar for its earnings, NVIDIA could easily close the gap in Q3 and Q4 if its margins and market share continue to squeeze out the competition.

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