Nvidia can absorb a bigger research budget far more easily than AMD, a comparison of their latest quarters shows. Nvidia spent $7.05 billion on research and development in its quarter ended July 26; AMD spent $2.53 billion in its quarter ended June 27. Research took 7.3% of Nvidia's $96.22 billion revenue, against 21.9% of AMD's $11.54 billion. A 20% rise in research spending, with all else fixed, would cost Nvidia $1.41 billion and cut its $63.73 billion operating income by 2.2%. For AMD, the $506 million cost would cut its $1.99 billion operating income by 25.4%. AMD could gain more operating leverage if adoption of its chips grows without equally fast expense growth.

Nvidia is far more exposed to a data-center slowdown than AMD, based on reported sales mix. Data centers made up about 92.5% of Nvidia's $96.221 billion quarterly revenue (quarter ended July 26), against 58.1% of AMD's $11.536 billion (quarter ended June 27). A 10% drop in data-center sales would cut Nvidia's total revenue by about 9.25% and AMD's by 5.8%. At a 20% drop, the cuts would be 18.5% and 11.6%. AMD's other units offer no sure cushion. Gaming revenue fell 31% year on year in the June quarter, while client revenue rose 23% and embedded revenue rose 19%. Valuation also differs. Trailing free-cash-flow multiples were near 41 for Nvidia and 106 for AMD as of October 16.

AMD shares have returned about 160% this year, making the chip designer the S&P 500's ninth-best performer. The gain was closer to 200% before a recent sell-off. The author argues the stock's valuation far outpaces its growth. In Q2, AMD's revenue rose 50% year over year to $11.5 billion, and its data center revenue grew 107% to $6.7 billion. Nvidia did better. Its revenue rose 106% to $96.2 billion, and its data center revenue climbed 117% to $89 billion, so its lead is widening. The author sees a fair forward price-to-earnings ratio of about 30 for both stocks. Even on 2027 earnings, AMD sits above that, while Nvidia trades at about half AMD's price. The author suggests taking AMD gains and moving them into Nvidia.