AMD has shown remarkable growth in the latter half of 2025, marking a significant turnaround in its competitive landscape against Nvidia, which has long remained the dominant player in the artificial intelligence (AI) sector. Historically, AMD’s stock has lagged behind Nvidia’s performance since 2023, with AMD experiencing a rise of approximately 230%, whereas Nvidia surged by an impressive 1,160%. In a surprising twist, however, AMD has significantly outperformed Nvidia in 2025, seeing a nearly 80% increase in its stock, while Nvidia’s stock climbed around 35%.
This resurgence has solidified AMD’s status as a compelling investment choice this year, raising questions about its trajectory into 2026.
AMD’s recovery appears to be legitimate, especially as Nvidia continues to be the favored graphics processing unit (GPU) provider for AI hyperscale companies. Despite Nvidia’s strong foothold, AMD is narrowing the gap, particularly in software capabilities. Nvidia’s CUDA software has historically set the company apart, but recent acquisitions and partnerships have substantially improved AMD’s ROCm software. The company reported a dramatic tenfold increase in downloads of ROCm year-over-year as of November 2025, reflecting its growing popularity among developers.
In Nvidia’s Q3 FY 2026 earnings call, CEO Jensen Huang disclosed that the company was “sold out” of cloud GPUs, a situation that could push cloud clients to seek alternative computing solutions. AMD stands poised to benefit from this dynamic. If customers discover that AMD’s hardware can offer comparable performance at a lower cost, significant client migration from Nvidia to AMD could occur. Such a shift would position AMD as a leading AI stock going into 2026 and beyond.
Moreover, AMD’s management is optimistic about its data center division, projecting a compounded annual growth rate (CAGR) of 60% through 2030, despite current growth standing at only 22%. While ambitious, if AMD meets its goals, it could solidify its role as a premier AI stock in the coming years. Additionally, AMD anticipates an overall company growth rate of around 35%, driven by challenges in segments like consumer hardware and embedded processing, which are expected to grow at a slower 10% CAGR over the next five years.
Despite the promising outlook, there is a notable factor that could be a potential hurdle: a considerable portion of AMD’s positive trajectory may already be factored into its stock price. Currently, AMD trades at a significant premium compared to Nvidia, with investors paying nearly 50% more for AMD shares based on forward earnings metrics. This premium raises concerns, as AMD’s comeback is still largely in the discussion phase, and concrete progress is needed before it can be definitively labeled as the superior investment choice for 2026.
In conclusion, while AMD has made meaningful strides and presents an attractive investment, the high valuation relative to Nvidia warrants caution. Investors may need to monitor AMD’s advancements and upcoming performance metrics closely before fully endorsing it as the leading stock choice for the following year.
