To The Moon

$AMD(AMD)$

$NVIDIA Corp(NVDA)$

AMD vs. NVDA: Strength in diversification

While Nvidia saw substantial losses in its second quarter, AMD boasted a 70% rise in year-over-year revenue. The increase was primarily fueled by a 32% rise in gaming revenue. The stark difference between the companies' gaming segments comes from the difference between the gaming PC and console market. Nvidia's gaming revenue is comprised of GPU sales to PC gamers, with a portion made from providing chips to Nintendo's Switch console.

AMD's segment is far more diverse, with revenue coming from PC GPU sales and semi-custom products it provides for consoles such as Microsoft's (NASDAQ: MSFT) Xbox, Sony's (NYSE: SONY) PlayStation, and Valve's Steam Deck. 

In 2021, the Nintendo Switch sold 8.2 million units, while the Xbox Series X|S sold about 8.7 million, and the PlayStation 5 sold 11.5 million. AMD's rise in gaming revenue shows that its ability to diversify the segment has played to its advantage.

The PC market is in a slump, with multiple tech companies feeling the effects. Despite significant gains in revenue in its second quarter, AMD's Q3 revenue projection of $6.7 billion versus analysts' expectation of $6.81 billion due to decreased PC demand caused its stock to fall 10.2% in August.

However, its gaming segment isn't the only part of its business strengthened by its diversification. While Nvidia's business is 30% gaming and 56.7% data centers, AMD's is a much more evenly split between its four segments. In Q2 2022, AMD's revenue was 22% data centers, 32.8% clients, 25% gaming, and 19% embedded products.

There is no doubt that Nvidia and AMD have suffered at the hands of the declining PC market. However, AMD seems more capable of propping up its business with its other segments. Nvidia's dependence on PC sales and the volatility in the cryptocurrency market make it a less reliable stock.

Additionally, AMD said in a 2022 earnings call that it had gained market share for nine consecutive quarters, having taken share from Intel, illustrating its growing dominance in the market. Its consistent growth and variety of succeeding segments suggest AMD is the better buy over Nvidia.