Nvidia dominates AI chips; AMD pursues broader strategy

Nvidia and Advanced Micro Devices have both ridden the wave of AI accelerator demand over the past few years, but the two semiconductor companies have charted markedly different courses. The divergence becomes apparent when comparing their business compositions four years apart.

Four years ago, in Nvidia's first quarter of fiscal 2023 (ended May 1, 2022), the company was far more diverse. Its data center segment had just become its largest business segment, but gaming remained substantial thanks to Nvidia's strength in producing GPUs. Professional visualization and automotive and robotics segments also contributed meaningfully. By Nvidia's first quarter of fiscal 2027 (ended April 26, 2026), however, the data center segment—which now designs AI accelerators—had swollen to 92% of company revenue. The other three segments that existed four years ago are no longer broken out separately; their combined 8% now falls under an edge computing segment that includes gaming products. This consolidation reflects Nvidia's wholesale pivot toward AI. The results have been striking: revenue rose 85% in fiscal Q1 and 65% in fiscal 2026. The stock trades at just 31 times earnings, suggesting investors believe the company has room to run.

AMD's path has been deliberately different. When Lisa Su became CEO in 2014, she shifted the company's emphasis toward CPUs and GPUs, a direction the company has maintained through intentional business segmentation. In the first quarter of 2022, computing and graphics plus an enterprise, embedded, and semi-custom division made up nearly all of AMD's revenue. Four years later, in Q1 2026, AMD's data center segment (its AI accelerator business) accounts for around 56% of revenue—substantial but far from Nvidia's dominance. The client and gaming segment claims 35% of AMD's revenue, and the embedded segment the remaining 9%. Importantly, the embedded segment has remained roughly stable since AMD first purchased Xilinx, indicating the company has not abandoned it. AMD's annual revenue growth was 38% in Q1 and 34% in 2025, both robust figures but trailing Nvidia's pace. The stock's 161 P/E ratio reflects investor skepticism about AMD's ability to close the gap.

The strategic question hanging over AMD is whether it will eventually become dominated by AI accelerators like Nvidia, or whether it will maintain its diversified approach. The diversity strategy appears more likely. AMD's embedded segment focuses on edge computing and physical AI, giving the company reason to keep investing there. More importantly, AMD emphasizes CPUs—chips that have become critical to data center build-outs and are not a specialty for Nvidia. This CPUs-plus-accelerators positioning is a deliberate hedge against a future where accelerator dominance fades. Still, for now, Nvidia's first-mover advantage, faster growth, and lower valuation have made it the standout: the data center AI market is rewarding focus and speed over diversification, at least in the near term.

Nvidia and AMD have followed distinctly different paths in response to the AI boom, and their divergence is rooted in strategic choices made years before. Nvidia's transformation began around fiscal Q1 2023 (ended May 1, 2022), when its data center segment first became its largest business. Four years later, that segment has consumed nearly the entire company—92% of revenue. In contrast, AMD's direction was set when Lisa Su became CEO in 2014 and shifted focus toward CPUs and GPUs; the company has deliberately maintained multiple business segments even as its data center AI business has grown. AMD's embedded segment, which represents 9% of revenue, is notably not far below where it stood after the Xilinx acquisition, signaling intentional retention rather than abandonment.

The strategic divergence reflects two bets on how the AI infrastructure market will evolve. Nvidia's bet is that AI accelerators will remain the central bottleneck and source of value—a bet that has paid off so far, given its 85% Q1 revenue growth and 65% fiscal 2026 growth. AMD's bet is that CPUs, embedded processors for edge AI, and GPUs will all remain critical to building out AI data centers, and that Nvidia's singular focus leaves it exposed. While AMD's revenue growth of 38% in Q1 and 34% in 2025 is substantial, it trails Nvidia's, and the market has priced in this difference: Nvidia trades at 31× earnings while AMD trades at 161×. Neither approach is obviously wrong, but the market is currently rewarding Nvidia's speed and focus over AMD's hedged, diversified strategy.