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Nearly a month before Nvidia’s consensus-beating earnings for Q1, rival Advanced Micro Devices Inc (NASDAQ: AMD) released its earnings for the same period, which also beat consensus estimates. Both companies – often compared to each other – have had markedly different performance in the Year Till Date (YTD) up until this past Friday: while Nvidia had risen 127.6%, AMD had risen only 20.4%.
This might be slightly unfair, given that both companies’ current addressable markets aren’t necessarily the same.
Trend AnalysisUsing the same comparison metrics as those employed in the article describing Nvidia’s Q1 earnings1, AMD’s metrics suggest that AMD is on the cusp of transformation.
Source: Company Information; Leverage Shares analysis
While Nvidia’s revenues have traditionally lapped those of AMD by some margin, 2022 was the year both drew up about par. 2023, however, saw Nvidia pile on gains by progressively stronger focus on a corporate clientele via its Data Center segment – resulting in revenues four times as much as its rival the next year.
However, Nvidia’s clientele shift was a work many years in the making. AMD’s higher operating expenses – as well as R&D expenses – in 2022 and 2023 suggest that a similar reorientation is being ventured into by AMD. In Q1, while R&D expenses have remained comparatively high relative to revenues (or sales) as in the two previous full years, net operating expenses have seen a net drop.
This has been enormously transformative for the company’s pass-through rate from revenues to net income, which is back at 19% (last seen in 2021). When compared against trends seen in Nvidia, 2024 for AMD is roughly comparable to 2022 (Nvidia’s FY 2023): a low net income pass-through and high operating expenses paved the way for explosive growth in net income pass-through and lower operating expenses as the corporate clientele poured in.
Just as with NVIDIA in 2022, roughly half of AMD’s Q1 2024 revenue is attributable to its Data Center segment. Unlike NVIDIA, only half as much revenue is attributable to Gaming. Also unlike NVIDIA is revenue contributions from Client and Embedded segments, which collectively make up 40% of AMD’s revenue unlike 9% in NVIDIA’s case in 2022. In the most recent quarter, NVIDIA’s contributions from these two segments have dwindled to 3%.
In the most recent quarter, AMD states that its Data Center segment is driven by sales of Instinct MI300 GPUs and 4th Gen EPYC CPUs, which is slightly different from NVIDIA’s strategy of driving sales via cutting-edge GPUs – which tend to be pricier than CPUs and have stronger performance characteristics. AMD also reports that that the MI300 ecosystem continues to be driven forward by an evolution of its ecosystem via software-driven optimizations via the ROCm 6.1 stack. A number of its clients – such as Lenovo, Samsung and Vodafone – have demonstrated that software-driven AI optimization unlocks improved performance in its EPYC CPUs as well.
Much like NVIDIA, gaming is becoming less important to AMD’s bottom line. Substantial growth via gamer adoption is unlikely to be a byword for these companies’ performance, unlike in the past. The way forward seems to be the “corporate” and 2025 might be a flagship year for AMD in terms of revenue growth and earnings pass-through.
Market Behaviour and ConclusionAcross 2023 till the present, the 15-day average daily traded volume of AMD is 34% higher than NVIDIA’s.
Source: Leverage Shares analysis
Relative to NVIDIA, however, overall trading volumes suggest a “zero-sum” dynamic tends be at play between the two stocks wherein the relative volume trend of one stock historically runs counter to that of the other. There isn’t a strong rationale to this, given that while the corporate sector’s buy-in tends to be sustained and orderly, it isn’t necessarily insensitive to price; sustained lock-in would be dependent on best cost/value realizations. AMD and NVDIA currently occupy different parts of price/performance spectrum and every part of the spectrum receives a fair bit of corporate attention. As upgrade cycles turn, there is ample opportunity for mixed-mode optimization.
All in all, AMD is likely to see increased attention in tactical trading and long-term holding patterns. A trillion-dollar capitalization isn’t entirely out of the question. Professional investors can consider Leverage Shares’ products built specifically to monetize on bullish or bearish trends by considering the likes of AMD3 and AMDS respectively.
Footnotes:
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If you are not classified as an institutional investor, you will be categorised as a private/retail investor. At this time, we cannot send communications directly to private/retail investors. You are welcome to view the contents of this website.
If you are an ‘Institutional investor’, you affirm either that you are a Per Se Professional Client, or that you wish to be treated as an Eligible Counterparty Client, both as defined under the Markets in Financial Instruments Directive, or an equivalent in a jurisdiction outside the European Economic Area.
Risk Warnings
The value of an investment in ETPs may go down as well as up and past performance is not a reliable indicator of future performance. Trading in ETPs may not be suitable for all types of investor as they carry a high degree of risk. You may lose all of your initial investment. Only speculate with money you can afford to lose. Changes in exchange rates may also cause your investment to go up or down in value. Tax laws may be subject to change. Please ensure that you fully understand the risks involved. If in any doubt, please seek independent financial advice. Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuer.
This website is provided for your general information only and does not constitute investment advice or an offer to sell or the solicitation of an offer to buy any investment.
Nothing on this website is advice on the merits of any product or investment, nothing constitutes investment, legal, tax or any other advice nor is it to be relied on in making an investment decision. Prospective investors should obtain independent investment advice and inform themselves as to applicable legal requirements, exchange control regulations and taxes in their jurisdiction.
This website complies with the regulatory requirements of the United Kingdom. There may be laws in your country of nationality or residence or in the country from which you access this website which restrict the extent to which the website may be made available to you.
United States Visitors
The information provided on this site is not directed to any United States person or any person in the United States, any state thereof, or any of its territories or possessions.
Persons accessing this website in the European Economic Area
Access to this site is restricted to Non-U.S. Persons outside the United States within the meaning of Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”). Each person accessing this site, by so doing, acknowledges that: (1) it is not a U.S. person (within the meaning of Regulation S under the Securities Act) and is located outside the U.S. (within the meaning of Regulation S under the Securities Act); and (2) any securities described herein (A) have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction and (B) may not be offered, sold, pledged or otherwise transferred except to persons outside the U.S. in accordance with Regulation S under the Securities Act pursuant to the terms of such securities. None of the funds on this website are registered under the United States Investment Advisers Act of 1940, as amended (the “Advisers Act”).
Exclusion of Liability
Certain documents made available on the website have been prepared and issued by persons other than Leverage Shares Management Company. This includes any Prospectus document. Leverage Shares Management Company is not responsible in any way for the content of any such document. Except in those cases, the information on the website has been given in good faith and every effort has been made to ensure its accuracy. Nevertheless, Leverage Shares Management Company shall not be responsible for loss occasioned as a result of reliance placed on any part of the website and it makes no guarantee as to the accuracy of any information or content on the website. The description of any ETP Security referred to in this website is a general one. The terms and conditions applicable to investors will be set out in the Prospectus, available on the website and should be read prior to making any investment.
Leverage Investment
Leverage Shares exchange-traded products (ETPs) provide leveraged exposure and are only suitable for experienced investors with knowledge of the risks and potential benefits of leveraged investment strategies.
Cookies
Leverage Shares Management Company may collect data about your computer, including, where available, your IP address, operating system and browser type, for system administration and other similar purposes (click here for more information). These are statistical data about users’ browsing actions and patterns, and they do not identify any individual user of the website. This is achieved by the use of cookies. A cookie is a small file of letters and numbers that is put on your computer if you agree to accept it. By clicking ‘I agree’ below, you are consenting to the use of cookies as described here. These cookies allow you to be distinguished from other users of the website, which helps Leverage Shares Company provide you with a better experience when you browse the website and also allows the website to be improved from time to time. Please note that you can adjust your browser settings to delete or block cookies, but you may not be able to access parts of our website without them.
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