By Will Healy, The Motley Fool
Publication Date: 2026-10-19 01:20:00
Advanced Micro Devices (NASDAQ: AMD) has sold off in recent trading sessions. Amid an artificial intelligence (AI) chip shortage, it has thrived, as the leading AI chip company, Nvidia (NASDAQ: NVDA), is unable to meet all of the demand.
Admittedly, if the AI industry slowed and Nvidia could serve all interested customers, investors might have less reason to buy from AMD. But in that case, one overlooked factor could have the most effect on investors.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
The supreme threat to AMD stock
Right now, the most pressing risk to AMD shareholders is the stock’s valuation.
Currently, its price-to-earnings (P/E) ratio stands at 139. That is several times higher than the earnings multiples of Nvidia, Broadcom, and Taiwan Semiconductor. Additionally, AMD’s forward P/E ratio of 72 appears to confirm the overvaluation.
Data source: YCharts.
Worse, that valuation is probably based on its future as an AI chip producer. Indeed, if more customers turn back to Nvidia, investor interest in AMD stock could plummet. Moreover, if AMD’s P/E ratio falls to Nvidia’s current level, the stock could lose close to 80% of its…
