AMD needs a "perfect financial report" tonight to respond to the market as its stock price increase surpasses NVIDIA

According to Zhitong Finance APP, AMD (AMD.US) will announce its second-quarter earnings after the U.S. stock market closes on Tuesday. The company's financial report is expected to show that this chip manufacturer is increasingly benefiting from the competitive landscape in the artificial intelligence sector. The question is whether this is enough to justify the rise in its stock price, especially since it has already outperformed NVIDIA (NVDA.US) this year.

AMD is the best-performing chip manufacturer, with its stock price rising 46% in 2025. This advantage is becoming more apparent as companies continue to invest in artificial intelligence computing devices. NVIDIA, which dominates the accelerator market used for running and developing AI services, has also seen its stock price increase by 34%. Compared to much larger competitors, AMD's strong performance indicates that semiconductor investors find the current market performance unsatisfactory, thus holding high expectations for it.

Matt Wittmer, a portfolio manager at Allspring Global Investments, stated, "For AMD, the key to maintaining its growth momentum lies in understanding its positioning in AI infrastructure. The stock has performed well recently, but its valuation may be somewhat high. However, in the long run, it is still expected to benefit as the entire AI sector continues to expand."

This year, chip stocks have performed strongly as the acceleration of expanding AI computing capabilities is underway. The Philadelphia Semiconductor Index has risen by 13%, surpassing the 10% increase of the Nasdaq 100 Index. In the past two weeks, Meta (META.US), Microsoft (MSFT.US), Amazon (AMZN.US), and Alphabet (GOOGL.US) have all announced ambitious spending plans, with a total capital expenditure of over $340 billion this year, most of which will be allocated to AI computing power.

It is estimated that NVIDIA holds about 95% of the revenue share in the GPU market, which excels in AI computing. Despite AMD's continuous development, this chip manufacturer only accounts for a 5% market share. Analysts predict that AMD's revenue for the second quarter is expected to reach $7.4 billion, a 27% increase from the same period last year.

However, merely meeting Wall Street's expectations may not be enough to satisfy investors. Last week, Arm Holdings (ARM.US) experienced its largest decline of the year, despite its revenue forecast for the current quarter aligning with analysts' average expectations. Similarly, Qualcomm (QCOM.US) faced a 7.7% drop in its stock price the day after announcing its quarterly sales forecast range In addition to its investments in artificial intelligence, AMD has also profited from an increase in its market share in the central processing unit market, an advantage gained by eating into Intel's (INTC.US) market share. Intel is working hard to regain its technological leadership. Furthermore, AMD is expected to see growth as it plans to resume sales of some artificial intelligence chips in China after receiving approval from the U.S. government.

However, the current focus remains on the opportunity presented by artificial intelligence. According to Ulrike Hoffmann-Burchardi, Chief Investment Officer of UBS Financial Services Americas and Global Equities, global spending in the artificial intelligence sector is expected to reach $50 billion by 2026, an increase of nearly one-third from this year. In a report published on July 31, she wrote, "The strong trend of AI investment spending will continue to support profit growth in the technology sector. The semiconductor industry will remain the fastest-growing area."

It is predicted that when NVIDIA announces its second-quarter earnings on August 27, its revenue growth rate will reach 53%, double that of AMD's growth rate. However, NVIDIA's stock valuation is roughly the same as AMD's, at about 35 times the expected earnings for the next 12 months.

The difficulty of competing with NVIDIA is a significant reason why Wall Street holds a more cautious view on AMD's growth prospects. According to analyst data, less than 70% of analysts recommend buying AMD stock, while the proportion for NVIDIA is close to 90%. With AMD's stock trading 15% above the average target price, analysts predict that the company's return potential in the Philadelphia Semiconductor Index is the worst.

Randy Hare, Head of Equity Strategy at Huntington National Bank, remains optimistic about NVIDIA rather than AMD, as its growth performance is more impressive. However, he stated that both companies have the potential to continue outperforming the market. Hare said, "Investors are gradually realizing that this market is large enough to accommodate more than one 'fish' (i.e., more than one company)."