Nvidia (NVDA 0.04%) has widely been regarded as the best artificial intelligence investment opportunity in the AI arms race. However, recent events have caused Advanced Micro Devices (AMD +0.68%) to gain traction in this area. The hype around AMD's business started when it announced a deal with OpenAI to provide 6 gigawatts of computing power through a deal where OpenAI invested in AMD as the computing power is delivered.
While this deal is important for AMD, what it really signaled was that a leading generative AI company plans on using AMD's hardware. That's a big deal, as AMD's technology has always been seen as a downgrade from Nvidia. This could be setting the stock up for another huge movement on Nov. 4, when it reports Q3 earnings, as AMD may unveil a huge order backlog that popped up following its OpenAI deal.
The burning question remains: Should you buy AMD stock right now? Or wait until after Nov. 4?
AMD still has a lot to prove
While the OpenAI deal is a start, it's still not as big as some investors may think. AMD is providing 6 gigawatts of computing power, but Nvidia also announced a partnership to deploy 10 gigawatts a few weeks before AMD's announcement. Additionally, Broadcom and OpenAI announced a similar deal to provide 10 gigawatts of computing power.
If AMD's platform were emerging as the best option, OpenAI wouldn't have signed bigger deals with Broadcom and Nvidia. I think this conveys that OpenAI was attempting to secure as much computing power as possible and was willing to make deals with every computing provider out there to make it happen.
NASDAQ: AMD
Key Data Points
But that wasn't the sole purpose of the partnership. OpenAI is also going to help AMD continue to develop its ROCm software, which is needed to control its graphics processing units (GPUs). This is the primary reason why Nvidia has separated itself from AMD in recent years, as its CUDA software is far better than AMD's. This is critical in squeezing out every ounce of performance from these chips, and without a reasonable alternative, Nvidia's products will continue to outperform solely due to the controlling software.
However, if they can make enough improvements in this software, it may open up a huge market opportunity, as AMD's computing units are far cheaper than Nvidia's. But will that translate into results during AMD's Q3 report?
AMD's last report left a lot to be desired
The last time we heard from AMD, the data center results were rather embarrassing. AMD's data center revenue only rose by 14% year over year and fell 12% quarter over quarter. Considering that Nvidia's fiscal 2026 second quarter (ended July 27) saw data center revenue increase by 56% year over year and 5% quarter over quarter, this is a huge separator.
AMD may report disappointing results like this again in Q3 because the OpenAI announcement was made in October. So, the important thing to watch is management's language surrounding what future demand holds. If this is less than investors expected, it could sink shares, as the stock has already run up to a premium price tag following its announcement with OpenAI.
AMD PE Ratio (Forward 1y) data by YCharts
At 41 times 2026 earnings, AMD is an incredibly expensive stock, and it could be a huge risk for the stock if it cannot convert the positive relationship developments into actual sales. On the flip side, if AMD announces massive computing capacity contract wins, then the stock could soar following the announcement.
I'm planning on staying patient with AMD stock until after Q3 results are reported. I think there is a lot of hype built into the stock for relatively little financial success, and I need to see that turn around before I would consider AMD over Nvidia. There are some signs of life at AMD, but it's not enough to make me scoop up shares before I review more information about what's happening.
