AMD Just Joined Nvidia in the $1 Trillion Club. At $614, Wall Street Is Paying Too Much for a Distant No. 2. | The Motley Fool

The trillion-dollar club just ushered in its newest member. As of midday trading on Sept. 23, Advanced Micro Devices (AMD +2.38%) boasts a market cap of $1 trillion. AMD now joins Nvidia (NVDA -0.41%), Taiwan Semiconductor Manufacturing, Broadcom, Samsung, and Micron Technology as the semiconductor stocks with a trillion-dollar valuation.

This is the kind of milestone that makes some people stop thinking and start buying blindly. Here’s the thing: AMD is not Nvidia. It is the distant No. 2 in the artificial intelligence (AI) accelerator market, and at its current price point, Wall Street is paying a premium as if the gap is about to vanish. Let me explain why it’s not.

AMD’s journey to a trillion-dollar valuation

When Lisa Su became CEO of AMD on Oct. 8, 2014, the company was a turnaround project. At the time, AMD was worth about $2 billion, and shares looked like they were headed toward penny-stock status. Fast-forward to today, and AMD trades around $614 — a gain of nearly 19,000%.

AMD data by YCharts

AMD did not reclaim relevance following one lucky quarter. Under Su, the company has executed a number of rebuilds. First came Ryzen in PCs, followed by Epyc in servers. AMD subsequently acquired Xilinx and Pensando, which gave the company FPGAs, DPUs, and a broader data center story. The latest chapter is Instinct accelerators and the Helios rack-scale system — GPUs, Epyc CPUs, and networking solutions sold as a full AI stack instead…