While Nvidia (NASDAQ: NVDA) has been quite the star in 2023, rival AMD (AMD 0.04%) hasn't had nearly the success. While AMD stock is up 60% this year, it's nowhere near Nvidia's 200%-plus performance. Because these two both operate in the  graphics processing unit (GPU) industry with serious artificial intelligence (AI) implications, some investors may wonder why AMD hasn't seen the same returns.

Throw in the fact that AMD's stock is cheaper than Nvidia's, and it may make investors wonder if AMD could be their ticket to incredible returns. So, is AMD a millionaire-maker stock? Or is there a reason for this discrepancy? Let's find out.

AMD isn't on the same level as Nvidia

While Nvidia focuses solely on GPUs, AMD has a wide product suite. AMD has a wide reach in the computing industry with its embedded processor, CPU, and data center product lines. As a result, AMD becomes a proxy for the computing industry as a whole, not just in a specific GPU sector in which Nvidia has seen incredible growth.

While this hurts AMD during boom times, it also helps during downturns. This is evident in their revenue growth rates over the past three years, as the last year hasn't been great for GPU sales.

AMD Revenue (Quarterly YoY Growth) Chart

AMD Revenue (Quarterly YOY Growth) data by YCharts.

But, with Nvidia's recent success, AMD looks left behind with its 18% revenue shrink compared to Nvidia's double.

Another area where investors might be drawn to AMD is its valuation, as it doesn't carry as much of a premium price tag as Nvidia, at least when assessed from a price-to-sales perspective.

AMD PE Ratio (Forward) Chart

AMD P/E Ratio (Forward) data by YCharts.

However, when earnings are considered (I'm using forward earnings because both companies have had a tumultuous previous 12 months), Nvidia and AMD are valued around the same levels. Why is this the case? It all has to do with margins. Nvidia's margins are significantly better than AMD's, primarily because of its best-in-class technology. If AMD and Nvidia's GPU technology were on the same level, then Nvidia wouldn't be able to charge a premium price tag for its products.

Additionally, because most of AMD's product line is practically commoditized, it likely will never have premium margins. So, if you're looking for AMD to transform into an Nvidia-like rocketship, you'll likely be disappointed. But does that mean investors shouldn't invest in AMD at all?

AMD isn't just struggling against Nvidia

AMD's wide product range gives it competition on multiple fronts, but that doesn't mean it's losing them all. Its embedded processor division, which was created by its Xilinx acquisition, saw strength, with revenue rising 16% year over year. However, the weak PC market continues to be an issue for AMD, as it was down 54% in the second quarter.

Perhaps the most disappointing segment was data center, which was down 11%. This is the area Nvidia is seeing an unprecedented boom in, and with massive AI data center demand, AMD's lack of success worries me. AMD is still a key player in this space, but if it doesn't show success soon, it may be a cause for concern. 

So, what are investors to do with AMD? With the stock performing well this year despite shrinking revenue and falling to unprofitability, I think it's best to avoid it until we get some clarity. AMD's data center and client revenue must recover before the business becomes a viable investment again. 2024 may be that year, as Wall Street analysts think AMD is slated to grow its revenue by 21% and earnings per share by 51%.

Still, I think AMD's run-up this year results from next year's predicted success. Regardless, AMD has shown investors that its AI products aren't up to par with Nvidia's, which is unfortunate considering how massive this opportunity is. As a result, I think AMD's stock is best avoided, as other more lucrative AI investments are available.