Better AI Stocks: Intel vs. AMD

Over the past year, almost every headline has seemed to focus on artificial intelligence (AI) in some form. Interest in the technology has surged as numerous companies reorganize their businesses around AI.

The advent of OpenAI’s ChatGPT has led to a surge in demand for similar services across a variety of industries, presenting dozens of exciting investment opportunities. In fact, the Nasdaq Composite Index is up 29% over the past 12 months, with growth largely driven by expectations about AI.

However, this new market is still in its infancy, suggesting it is not too late to invest. And chip stocks appear to be the best bet. These companies are developing the hardware that makes AI possible, and it’s unlikely that demand for their chips will slow down anytime soon.

There are currently two attractive AI chip stocks. intel (INTC -2.40%) and advanced micro devices (AMD -5.44%). Both chipmakers are expanding their presence in this emerging market and could benefit greatly in the long term. So, let’s examine these two businesses and determine whether Intel or AMD is the better AI stock today.

intel

If you’re purely looking at Intel’s recent performance, you might be wondering why you should potentially consider Intel over AMD. Intel’s stock has fallen nearly 45% since 2021 after repeated hits to its business.

The company has been the king of the chip market for years, with a dominant market share in central processing units (CPUs) and lucrative partnerships. apologize. However, the AI ​​boom has led the chip industry to shift towards graphics processing units (GPUs) and demand for CPUs has slowed. Meanwhile, with the iPhone company announcing in 2020 that it would change to using chips of its own design instead of Intel’s, Intel no longer has the security to supply chips to Apple.

Intel is on the back foot with unexpected macroeconomic headwinds that have triggered weak demand in the PC market in 2022.

But the recent challenges are precisely why Intel may be the winning choice in the long term. The company is investing heavily in AI, launching its Gaudi 3 AI GPU earlier this month, promising “50% better inference on average and 40% better power efficiency on average” than the market leader. nvidiaof GPU.

Additionally, the company is leveraging its dominant position in the CPU segment to drive market expansion. Xeon 6 processors feature enhanced AI capabilities and deliver 4x the performance of 2nd generation Xeon processors.

There’s a long way to go before Intel regains its former glory, but the decline could make Intel’s stock price one of the most valuable ways to invest long-term in AI.

advanced micro devices

AMD’s stock price rose 68% last year, attracting investors to its potential in AI. The company has benefited from sympathetic growth as rival Nvidia’s business exploded last year.

Nvidia’s AI GPUs have been available since early 2023, and have made significant gains by outpacing AMD and Intel in the market. But AMD is moving to secure its position in the lucrative AI market in line with its new valuation.

Like Intel, AMD has also launched its own AI GPUs to go head-to-head with Nvidia’s hardware. But AMD wants more than just Nvidia’s GPU market share. The company seeks to lead its own space within AI with its venture into AI-based personal computers.

On April 16, AMD launched Ryzen Pro 8000 for desktops and laptops. According to PCWorld, AMD’s next-generation chips make it the only CPU developer “bringing AI-powered NPUs to business desktop PCs.”

As demand for AI continues to surge, companies could experience impressive growth over the next decade.

Are Intel or AMD the better AI stock?

Intel and AMD have exciting prospects for AI and are likely to prove assets to any portfolio over the long term. However, some key valuation metrics show that Intel is trading at a much better price than AMD.

Data from YCharts.

The chart above shows that Intel has a significantly lower forward price-to-earnings (P/E) and price-to-sales (P/S) ratio than AMD. These metrics help determine stock value as they consider a company’s financial health relative to its stock price.

Forward P/E is calculated by dividing a company’s current stock price by its expected future earnings per share. Meanwhile, P/S divides market capitalization by sales over the past 12 months. For both metrics, lower numbers are better.

As a result, Intel’s low forward P/E and P/S indicate that Intel’s stock price is cheap compared to AMD. And with its growing presence in the AI ​​space, Intel is a no-brainer for now. However, it’s not a bad idea to keep an eye on AMD and strike when the time is right.