Advanced Micro Devices, Inc. (AMD)vs Alibaba Group Holding Limited (BABA)

Quick verdict

Advanced Micro Devices, Inc. (AMD) and Alibaba Group Holding Limited (BABA) appeal to different investors. On our six-factor framework, AMD scores 3 and BABA scores 3. BABA looks cheaper on the multiples that matter, while AMD grows faster and AMD earns higher returns on capital. The two are evenly matched overall, so your priority — value, growth, income or safety — should decide it.

2-year relative performance

At-a-glance comparison

Business model and revenue mix

Advanced Micro Devices, Inc. operates in Semiconductors (Technology), while Alibaba Group Holding Limited sits in Specialty Retail (Consumer Cyclical). The two operate in different sectors, so cyclicality and end-market exposure differ — factor that into any portfolio overlap. AMD carries a beta of 2.47 versus 0.50 for BABA, meaning AMD has historically been the more volatile of the two.

Valuation

On valuation, BABA is the cheaper stock. AMD trades on a forward P/E of 10.72 and EV/EBITDA of 105.04, against 22.12 and 13.33 for BABA. Price-to-sales is 22.72 vs 1.79, and free-cash-flow yield is 6.5% vs 3.3%. A higher multiple is only justified if the company can sustain faster growth or wider margins, which is exactly what the next sections test.

Growth profile

AMD is the faster grower. AMD has compounded revenue at 34.3% over three years with EPS growth of 164.4%, while BABA has delivered 2.7% revenue and -17.3% EPS growth. Growth like this is the single biggest driver of long-term returns, but it also tends to come with a richer valuation, so it must be weighed against the multiples above.

Profitability and quality

On profitability and quality, AMD is stronger. AMD posts a 11.7% operating margin, 8.1% return on equity and 6.2% return on invested capital. BABA posts 5.8%, 10.0% and 3.2% respectively. Return on invested capital above roughly 15% is a hallmark of a durable competitive advantage, so this metric deserves particular attention.

Balance-sheet risk

BABA has the safer balance sheet. AMD carries net-debt/EBITDA of 1.19x with a current ratio of 2.72, versus -2.45x and 1.28 for BABA. Lower leverage gives a company more room to invest through a downturn and reduces the risk of dilution or distress.

Price performance and shareholder returns

Over the past year AMD returned 8.3% against 114.9% for BABA; on a three-year annualised basis it is -2.0% vs 41.6%. AMD yields 3.5% and BABA yields 0.9%. Past performance never guarantees future results, but the multi-year track record shows how the market has rewarded each business so far.

Which stock fits which investor

For value-oriented investors, BABA is the better fit on today's multiples. Growth investors will likely prefer AMD, which is expanding faster. Income investors should lean toward AMD for its higher shareholder yield, while investors who prize quality-at-a-reasonable-price will favour AMD for its superior returns on capital. This is a comparison of facts, not a recommendation — your time horizon, risk tolerance and existing holdings should drive the final decision.

• Value: BABA
• Growth: AMD
• Income: AMD
• Quality: AMD

Frequently asked questions

Is AMD or BABA the better buy right now?

Neither is universally "better." AMD scores 3 and BABA scores 3 on our six-factor framework. BABA is cheaper, AMD grows faster, and AMD is higher quality — so the right pick depends on your objective.

Which stock is cheaper, AMD or BABA?

BABA is the cheaper stock across forward P/E (10.72 vs 22.12), EV/EBITDA (105.04 vs 13.33) and price-to-sales (22.72 vs 1.79).

Which has grown faster, AMD or BABA?

AMD has the stronger growth profile, with three-year revenue CAGR of 34.3% for AMD versus 2.7% for BABA.

Which stock pays a bigger dividend?

AMD yields 3.5% and BABA yields 0.9%, so AMD is the stronger income choice.

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