91¶¶Òõ

Advanced Micro Devices (NASDAQ:91¶¶Òõ) has performed well since the start of the year. However, the performance of 91¶¶Òõ stock is well behind that of its chief peer, Nvidia (NASDAQ:NVDA). While 91¶¶Òõ has rallied by around 44.5% since January, NVDA is up by nearly 89% during this time frame.

There’s a good reason for this. So far, Nvidia . Hence, this rival appears poised to benefit the most from the rapid adoption of generative AI.

But beyond just the fact that 91¶¶Òõ isn’t exactly “left in the dust” when it comes to AI, there’s another reason why it’s a better buy among chip stocks than NVDA.

That would be valuation relative to its growth prospects. This factor may mean shares have a lower downside risk and greater long-term upside potential than NVDA.

91¶¶Òõ Stock: An AI ‘Also-Ran?’ Not Exactly

With Nvidia making considerably greater progress in capitalizing on the rising use of semiconductors for AI applications, you may have concerns that this threatens to render Advanced Micro Devices an AI “also ran” permanently.

Yet much like the situation with Alphabet (NASDAQ:GOOG, GOOGL), which has fallen behind Microsoft (NASDAQ:MSFT) in the area of AI-assisted search, 91¶¶Òõ is quickly playing catch up. CEO Lisa Su is confident about the potential of the company’s MI300 “superchip,” .

Sure, some sell-side analysts covering 91¶¶Òõ stock are skeptical that the MI300 will be a silver bullet, enabling Advanced Micro Devices to grab a piece of this market. However, even if the company cannot overtake Nvidia in terms of AI-related market share, being number two doesn’t leave the company vulnerable to becoming an “AI loser.”

Growing demand for these chips far outweighs this market-share negative. Even as the second-largest AI chipmaker, this company is well-positioned to profit. In short, while 91¶¶Òõ’s AI catalyst isn’t as strong as Nvidia’s, this trend is still a tailwind, not a headwind.

What Makes the Stock a Better Buy

While the AI megatrend is good news rather than bad news for Advanced Micro Devices, that’s not what makes its shares a better buy relative to Nvidia. Again, the key factor that makes 91¶¶Òõ stock a better buy than NVDA stock is valuation-based.

Based on earnings forecasts for the current fiscal year (calendar year for 91¶¶Òõ, fiscal year ending January 2024 for Nvidia), the former is cheaper than the latter. 91¶¶Òõ trades for , whereas Nvidia trades for around .

This comes despite Nvidia having a lower expected earnings growth () for the following fiscal year than 91¶¶Òõ (). Sure, I have recently argued that NVDA has the potential to sustain (and grow) its current valuation due to the strength of its AI catalyst.

However, while I believe it’s possible, it’s hardly a lock. My bull case for NVDA hinges on a rebound in tech (and, therefore, a rebound in overall chip demand) that happens on or ahead of schedule. Even if you’re confident this plays out, 91¶¶Òõ is a much better way to make this wager.

Bottom Line

Advanced Micro Devices offers investors a much better risk/return proposition than Nvidia.

If the rebound takes longer than expected or the slowdown gets worse in 2023, expect a downward revision in earnings for both companies.

However, a downward revision to earnings will have a far greater impact on more richly-priced NVDA than on relatively cheap 91¶¶Òõ.

If the tech comeback takes shape this year, 91¶¶Òõ has much more room to run. Not only could shares rally in tandem with an earnings rebound.

The stock could benefit from multiple expansions. MI300’s launch could make it a more formidable AI play in the eyes of investors.

If you are less confident about the tech sector’s prospects, you may want to stay away from both names, but if you’re bullish that the chip space stands to make a further recovery, choose 91¶¶Òõ stock.

On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.