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NVIDIA Corp.�vs.�AMD Inc.

A full financial analysis by Piero C

(Please expand the “notes” portion of this presentation, and reference them as you move along the slides)

(June 2022)

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Part 1: The Companies

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AMD

Name: Advanced Micro Devices, Inc.

CEO/President: Lisa Su

Head Office: 2485 Augustine Drive Santa Clara, California 95054

Areas of Business activity: CPUs, Graphics Cards - Leveraged into “markets such as gaming, compute, artificial intelligence, cloud gaming, and virtual and augmented reality.”, Computing Solutions, Cloud infrastructure, cloud environment

Number of production facilities: 0

Ticker: AMD (Nasdaq)

Name per stock quotations: Advanced Micro Devices, Inc.

Length of Existence: 53 Years (est. 1969)

Fiscal Period Covered By Annual Report: Year Ended December 25, 2021 (2021)

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Nvidia

Name: Nvidia Corporation

CEO/President/Founder: Jensen Huang

Head Office: 2788 San Tomas Expressway Santa Clara, CA 95051

Areas of Business activity: Graphics (Cards), Scientific Computing, AI, data science, autonomous vehicles, robotics, VR/AR

Number of production facilities: 0

Ticker: NVDA (NASDAQ)

Name per stock quotations: NVIDIA Corporation Common Stock

Length of Existence: 29 Years (est. 1993)

Fiscal Period Covered By Annual Report: Year Ended January 20, 2022 (2021)

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Auditors and Their Conclusions

AMD

Ernst & Young LLP

“The consolidated financial statements present fairly”

Nvidia

PricewaterhouseCoopers LLP

“The consolidated financial statements referred to above present fairly”

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Miscellaneous Financial Information

AMD

Major sources of revenue:

Inventory valuation method:

Depreciation method:

Share Capital:

Nvidia

- Computing and Graphics

- Enterprise, Embedded and Semi-Custom

Specific Identification / Average Cost / FIFO

Straight-Line method

$11.081B

“Product sales, including hardware and systems, license and development arrangements,

software licensing, and cloud services”

Average Cost / FIFO

Straight-Line method

$10.388B

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Extraordinary Items: AMD

- Pending Acquisition of Xilinx Inc.

- Introduced stock repurchase program in May, 2021. (Up to $4B of outstanding common stock in open market)

- Since 2017, AMD stock has outperformed the S&P 500 index and the S&P 500 Semiconductors index by 558% and 320% respectively.

- Computing and graphics revenue increased 45% from 2020 to 2021 (6.4B - 9.3B).

- 57% increase in average selling price of products compared to 2020.

- The majority (28.3%) of sales made were to America. However, sales to politically vulnerable countries such as China and Taiwan, are high, as is so with Nvidia.

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Extraordinary Items: Nvidia

- AMD is noted in 3 of 4 competitive sectors on the Annual Review.

- 4.9% turnover rate compared to 13.2% industry average.

- July 19, 2021 four-for-one stock split.

- Repurchased 1.04 B shares ($7.08 B) since 2004, when stock repurchasing was authorized.

- Since 2017, NVDA stock has outperformed the Nasdaq 100 index by a total of 273%.

- Graphics and compute and networking revenue were both up 61% compared to 2020 (9.8B - 15.9B and 6.8B - 11B respectfully).

- Sources 58.2% of revenue from China and Taiwan (political instability concerns).

- Sources 16.2% of revenue from America, despite being a company based in America.

First point - The sectors are graphics processing units or GPU’s, System-on-a-chip or SoC’s, and interconnect and cable solutions. The sector where AMD is not mentioned is “internet service companies who design chips that incorporate accelerated computing functionality as part of their internal solutions or platforms”.

�5th point (stock performance) - With a $100 investment, including the reinvestment of dividends, the Nasdaq would return $303, and NVIDIA would return $828.

�7th point (Revenue from China and Taiwan) - Worth noting is that China and Taiwan are political rivals, so disagreements between them have and will continue to have business consequences.

�As well, China has a reputation for imposing trade sanctions on competing economies like America, which could also be a cause for concern in the future.

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Year Summary + Company�Outlook: AMD

Year Summary: “2021 was an outstanding year for AMD, as we exceeded our aggressive growth goals and delivered another record year. Each of our businesses grew significantly and set new annual revenue record, highlighted by data center revenue more than doubling year-over-year. Annual revenue grew 68% to a record $16.4 billion, and we expanded gross margin for the sixth straight year. We also delivered record net income and EPS, both of which more than doubled year-over-year.” - Lisa Su, CEO

Company Outlook: “We are confident in our ability to continue growing significantly faster than the market, based on our expanded road map investments and the deep relationships we have established with a broad set of customers who view AMD as a strategic enabler of their success.” - Lisa Su, CEO

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Year Summary + Company�Outlook: Nvidia

Year Summary: “NVIDIA had an excellent year. Full-year revenue was a record $26.91 billion, up 61 percent from $16.68 billion a year ago. Gross margins expanded to 64.9 percent, and earnings per share were $3.85, up 123 percent from a year ago. We returned $399 million during the year to shareholders through quarterly cash dividends” - Jensen Huang, CEO

Company Outlook: “We enter the upcoming year with strong momentum. Demand for our products is exceptional. We made substantial strides in diversifying and expanding our supply base. Our execution has never been better. And we go into this year with the largest wave of new products in our history” - Jensen Huang, CEO

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Part 2: Financial Analysis of the Annual Reviews

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Ratios

AMD

Current Ratio:

Inventory Turnover:

Profit Margin:

Return on Assets:

Return on Equity:

Earnings Per Share:

Debt Ratio:

Interest Coverage:

Nvidia

2.02:1

5.07 Times

19.2%

29.6%

47.4%

$2.62

40%

107.29:1

6.65:1*

4.26 Times

36.2%

26.7%

44.8%

$3.89

40%

42.55:1

<- x 329% ->

<- x 84% ->

<- x 189% ->

<- x 90% ->

<- x 95% ->

<- x 148% ->

=

<- x 40% ->

RED – AMD’s figure is bigger

Blue – Nvidia’s figure is bigger

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AMD Horizontal and Vertical Analysis: Balance Sheet

Focusing on the Horizontal analysis, looking at cash, short-term investments, accounts receivable, and inventories, we can see that AMD experienced a growth of on average about 45% in these areas.

�We can also see that they experienced a 39.7% growth in total current assets, an almost 300% increase in other non-current assets, and a 38.6% increase in total assets. This is a good sign for growth.

�We can see that liability accounts such as accounts payable, total current liabilities, and total liabilities experienced growths of 182.3%, 75.4%, and 57.5% respectively, signifying that AMD is accruing many liabilities in order to grow assets that can in turn reward a profit. They should be cautious of this practice, as, in excess, it can lead to a financially overextended business that can more easily experience insolvency. Notable also is that Treasury, or bought back stock increased 1526%, and total stockholder’s equity increased 28.4%.

Moving to the vertical analysis, we can see that cash, accounts receivable, and inventories represent 20.4, 21.8, and 15.7% of total assets respectfully. Total current assets represent 69.1%. These are generally healthy numbers.

�Accounts payable represent 10.6% of total liabilities and stockholders equity, total current liabilities represent 34.1%, total liabilities represent 39.6%, and total stockholders equity represents 60.4%. These are also healthy numbers. Worth noting is that having total liabilities be below 50% of total assets is good. We can see here that additional paid-in capital represents 89.1% of total assets. Additional paid-in capital is simply another way to express stock that is not common stock purchased at par value.

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AMD Horizontal and Vertical Analysis: Income Statement

Looking at the horizontal analysis, we can see that net revenue, cost of sales, and gross profit all experienced increases of over 55%, with gross profit even increasing 82.4%. This is a great signifier of a growing company, given that other operating costs do not cut in too much.

�Research and development and Marketing increased about 45% each, allowing for operating income to see an increase of 166.5%. Unfortunately, Income tax provision experienced a 142.4% increase, which means that net income only increased by 27%. AMD should work to get the net income number closer to the gross profit number by cutting costs. Worth noting also is that EPS increased by 24.3%.

�Moving to vertical analysis, we can see that net revenue and cost of sales represent 207.3% and 107.3% of gross profit, respectfully. This signifies, as stated before, that they are spending a lot in hopes of making more money, though these numbers smaller compared to last year. Operating income represents

46% of gross profit, and net income represents 39.9%, down from 57.3% last year.

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Nvidia Horizontal and Vertical Analysis: Balance Sheet

Focusing on the horizontal analysis, we can see that cash, marketable securities, accounts receivable, inventories, prepaid expenses and other current assets, total current assets, property and equipment, deferred income tax assets, other assets, and total assets ALL experienced significant increases year over year.

�Long term debt increased 83.5%, and total liabilities increased 47.7%, which is less than the 53.5% total assets increased. This is a good signifier that Nvidia is investing its capital into assets, and not accruing too much liability to do so. Worth noting also is that retained earnings dropped 14.1%, and total shareholders’ equity increased 57.5%.

�Looking at the retained earnings figure (not highlighted), it may be weird to see a negative number. You may think that this a signifier of decreasing profits, but as we get into the income statement, you will see that it is not. Note that Nvidia pays dividends, and AMD does not.

�Moving to the vertical analysis, we can see that most of Nvidia’s cash is in marketable securities, which, as mentioned before, are a safe investment, yet could be reason to believe that capital is not being put forth towards innovation. Total current assets represent 65.2% of total assets. Total Liabilities represent 39.8%, Additional paid-in capital represents 23.5%, and retained earnings represents 36.7%, down from 65.7% last year. Total shareholders’ equity represents 60.2%. Nothing too remarkable.

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Nvidia Horizontal and Vertical Analysis: Income Statement

Looking at the horizontal analysis, we can see that revenue, gross profit, and cost of revenue all experienced substantial growth year over year, with the former two outperforming the latter by about 11% and 18% respectfully.

�Income from operations was up 121.6%, and net income was up an astounding 125.1%. This is a fantastic increase, and is a great indicator of growth for Nvidia. Worth noting also is that net income per share increased 122.5%.

�On to the vertical analysis, we can see that revenue and cost of revenue are 154% and 54% of gross profit respectfully, These numbers are much less inflated than AMD’s, which is a good indicator that Nvidia isn't spending a lot of money to generate higher profits. Worth noting also is that net income is 55.8% of gross profit, up from 41.7% last year. Again, a good indicator that Nvidia is cutting down on costs but still turning a profit.

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Conclusion

AMD loses ground to Nvidia in ratios such as profit margin, earnings per share.
AMD has a slightly better return on assets, return on equity.
AMD is performing poorly in comparison to Nvidia with respect to Income Statement numbers such as cost of sales, net income (growth).
AMD has some ground to make up if they want to catch up to the industry leader.
Both companies experienced growth in the past year, should be able to continue to thrive in the market.
Nvidia outperforms AMD in key indicators of financial position.
Nvidia is in a better financial position.
Nvidia is likely to see better stock performance in the coming years, thanks to current and prospective innovations across multiple industries.
Few indicators that AMD will surpass Nvidia as leaders of the semiconductors market.

Nvidia and AMD are both American based, fabless semiconductor companies, focusing mainly on graphics and processing, while also leveraging their products and services into other markets such as AI and Cloud environment. Nvidia is a slightly larger company, but AMD holds its own.

�AMD loses ground to Nvidia in ratios such as profit margin, where their 19.2% is 17% lower than Nvidia’s 36.2%, and earnings per share, where their $2.62 is $1.27 lower than Nvidia’s $3.89. They however gain a bit of ground in ratios such as return on assets, where their 29.6% is 2.9% higher than Nvidia’s 26.7%, and return on equity, where their 47.4% is 2.6% higher than Nvidia’s 44.6%.

�AMD performs poorly on the income statements in comparison to Nvidia. Notably, their expenses are significantly higher than Nvidia’s. For example, cost of sales for AMD sit at 107.3% of gross profit, while cost of sales for Nvidia sit at 60.4%. This is a 46.9% discrepancy, and is a clear indicator that AMD is spending much more of their capital to catch up to the market-leader. Additionally, Nvidia’s net income increase of 125.1% crushes AMD’S net income increase of 27%.

�While one-year periods are not necessarily indicative of total financial standing of a company, AMD certainly has some ground to make up in the coming years if they want to compete adequately.

�In conclusion, while both companies experienced healthy growth in the past year, and can expect to continue to thrive in the market, Nvidia outperforms AMD in many key indicators of financial position including but not limited to profit margin, earnings per share, cost of sales, and net income increase.

�For this reason, Nvidia is in a better financial position. Being the leader of the semiconductor market, Nvidia should be able to continue expanding their graphics sector, as well as their other sectors such as AI and Cloud environment, while leveraging their business into other industries, and continuing to experience healthy growth, more so than AMD. This includes both internal growth as a company, and stock price. There are few indicators that AMD will surpass Nvidia as the leaders of the semiconductors market, and for that reason, Nvidia is the company that is in a better financial position.