Nvidia Vs. Advanced Micro Devices: Determining The True AI Alpha-OLS Model
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Forward Analytics133 FollowersFollow5ShareSavePlay(11min)CommentsSummaryNVIDIA is the premier AI semiconductor holding, delivering superior risk-adjusted returns and a robust alpha that justifies its premium valuation.NVDA's dominance is underpinned by its high R-squared (0.72), strong revenue elasticity, and lower sensitivity to sector and macro headwinds versus AMD.AMD offers high convexity and asymmetric upside, trading at a discount (P/S 10.75x) and presenting a contrarian opportunity for risk-tolerant investors.I recommend buying and holding NVDA for core AI exposure, with AMD as a high-volatility, value-rerating complement for aggressive portfolios. Robert Way/iStock Editorial via Getty Images Setting The Stage In the high-paced world of semiconductors, two key players stand out: Nvidia Corporation (NVDA) and Advanced Micro Devices, Inc. (AMD), each of them competing for supremacy inThis article was written byForward Analytics133 FollowersFollowI'm a seasoned financial analyst with a passion for puzzling out the complexities of the financial world. As a former writer for Fade The Market on Seeking Alpha, I diligently worked to provide insightful analysis and well-researched articles on various investment opportunities. However, I am no longer involved in analyzing, submitting, or commenting on articles for Fade The Market. With a vast experience, I have honed my expertise in evaluating market trends, analyzing investment opportunities, and providing strategic recommendations to optimize financial portfolios.Analyst’s Disclosure:I/we have a beneficial long position in the shares of NVDA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.Quick InsightsHow does NVDA's risk-adjusted return profile compare to AMD's?NVDA generates roughly twice the annualized alpha of AMD (0.018 vs. 0.009), translating to about 24% versus 11% excess returns, with lower volatility and stronger market confidence.What are the key sensitivities for NVDA and AMD to sector and macro factors?AMD has higher SOX beta (1.68 vs. NVDA's 1.42) and greater negative sensitivity to interest rates, implying higher drawdowns but also greater upside in favorable environments.What is the investment implication for portfolio construction between NVDA and AMD?NVDA should be the core AI semiconductor holding for long-term investors, while AMD offers high-volatility, high-convexity upside for those seeking value rerating and can tolerate greater risk.Recommended For You