Why Are AMD and NVDA chip stocks so popular and rising the past few years?

[kyphysics]

I'm a not techie - liberal arts and social sciences grad.

For those knowledgeable about this space, can you explain what AMD and NVDA have going for them that is so great that their stocks have risen by 20-30 times in the past few years?

I know that AMD is basically a chip company. They make computer chips that go into your computers. Do they do anything else? What makes their chips so great? I know NVDA is a chip and graphics processor company. They primarily make GPUs (I barely know what these are - feel free to explain anything unique about their GPUs) and these are used in video gaming and artificial intelligence (how?).

Lastly, does anyone know who makes the computer chips for IoT devices? Do AMD or NVDA have products in that space? Thanks.

 

[jedishrfu]

The gpus they create for graphics applications like games can also be for deep computational problems of data science, machine learning, deep learning and computational physics and engineering.

https://en.m.wikipedia.org/wiki/Graphics_processing_unit

 

[phinds]

Just FYI, your figures are off quite a bit. Those stocks HAVE risen massively, but more like by 15 and 10 each, not 20 to 30 each in the last 3 or 4 years or

 

[Rive]

Stock prices are mostly about faith and speculation than about any kind of reality. AMD had some bad years way back so the price went down: recently they could pull a miracle and create some CPUs faster and cheaper than their counterparts on Intel side, so they started to gather faith and create speculation that they worth more. So their stock prices went up. Don't think too much into it.

 

[phinds]

NVIDIA shot at lot on the back of the bitcoin surge and dropped off some when it dropped off. They make (or at least did make) the most popular chips for mining bitcoins. Even though those chips were only 10% of their business, their existence created a massive perception bump for NVIDIA

 

[anorlunda]

The OP question should have been, why are their products so popular, not their stocks.

 

[Vanadium 50]

First, you should learn where to look for this information. All publicly traded companies have to file an annual report to the SEC, called a 10-K. It describes what their markets are (for example, NVidia has a substantial presence in automotive) and provides at least some historical data: for example, between 2015 and now, NVidia's stock price has gone up by a factor of 8, but revenue has gone up by a factor of 6.5 - earnings per share a factor of 6. So most of the rise is understandable in that NVidia is making more money for its shareholders, so it is of course worth more. The difference between 8 and 6 is that collectively the market expects that earnings will continue to rise.

Second, you need to better understand what these companies do. You say "I know that AMD is basically a chip company. They make computer chips that go into your computers." In fact, that is not true. They haven't made a single chip since 2009. When investing, it's critical to understand what a company actually does - and in this case, a simple Wikipedia article would have helped a lot. And, as Russ said in a now-closed thread, "And if you don't know what you don't know, that's a big problem."

 

[russ_watters]

Just FYI, your figures are off quite a bit. Those stocks HAVE risen massively, but more like by 15 and 10 each, not 20 to 30 each in the last 3 or 4 years or

I'm pretty sure I still own some AMD from '99 when I bought at 17 sold a portion at 85...then it craterd with the dot-com crash and hasn't been anywhere near that since.

Full disclosure: I also bought some 3DFX at around the same time.

 

[jedishrfu]

I'm pretty sure I still own some AMD from '99 when I bought at 17 sold a portion at 85...then it craterd with the dot-com crash and hasn't been anywhere near that since.

Full disclosure: I also bought some 3DFX at around the same time.

You could be a penny millionaire and not know it.

 

[Vanadium 50]

Stock prices are mostly about faith and speculation than about any kind of reality.

I disagree. Sure, there are some stocks that attract people with a gambling mindset over an investing one, but the bulk of the market is priced in an understandable way. Johnson & Johnson, to pick a member of the Dow, has a P/E of 22. Coca-Cola (another member) is 32. Intel is 11. Pfizer is 17. Apple is 18. Home Depot is 21.

 

[kyphysics]

The OP question should have been, why are their products so popular, not their stocks.

Probably curious about both actually!

 

[russ_watters]

I disagree. Sure, there are some stocks that attract people with a gambling mindset over an investing one...

Well, it's the method/mindset itself in addition to the individual stock, and the characterization of gambling vs investing is a reference to that choice. If you want to invest in J&J, you buy and hold, and your odds of making money are very high. If you want to gamble, you can still do it on J&J stock, you just do it over the very short term, where the odds of it going up or down are almost exactly 50/50.