Better AI Stock: Intel Vs. AMD

Since the artificial intelligence (AI) boom began in early 2023, all eyes have been on chipmakers. Nvidia has taken much of the limelight, capturing 90% of the AI ​​chip market. However, its success has also sparked interest in rivals such as Intel (INTC -8.80%) and Advanced microdevices (AMD -7.82%)which could be riding on Nvidia’s tail and similarly enjoying significant gains from the expanding sector.

AMD has made promising progress in the industry, with recent quarterly results showing that its data center revenue has skyrocketed amid rising sales of AI chips. Intel had a more difficult time succeeding in the market, focusing on the expensive foundry industry. However, Intel could be an attractive long-term play and could deliver major gains over the next decade as its chip factories become operational.

So let’s compare the businesses of these chipmakers and determine which is a better stock to invest in artificial intelligence (AI).

Intel: Considering splitting foundry and design businesses

Intel’s stock price fell 12% between August 29 and 30. Wall Street rallied after news broke that the company was considering splitting its chip design and manufacturing divisions. The company’s longtime bankers, Morgan Stanley and Goldman Sachsare reportedly advising Intel on its options after it released unexpectedly dismal earnings for the second quarter of 2024 in August.

During the period, Intel’s revenue fell 1% year over year to $13 billion, missing analysts’ forecasts by $150 million. Meanwhile, earnings per share of $0.02 were $0.08 less than expected.

It hasn’t been easy being an Intel investor in recent years, with its stock price down 53% since 2019. The company has faced steep earnings declines as it struggles to keep up with the competition and has been buffeted by macroeconomic headwinds. Intel tried to reinvent itself in 2024, moving towards AI by unveiling a range of new AI-enabled chips and expanding its foundry business in the US to potentially take advantage of the growing need for AI chipmakers.

However, recent earnings indicate that Intel may have bitten off more than it can chew. The company has excellent long-term prospects as both of its AI projects develop, but it could be many years before recent moves bear fruit.

AMD: Gaining Fast in the AI ​​Chip Market

While Intel is seemingly facing one difficulty after another, AMD is making positive progress in AI. The chipmaker’s quarterly free cash flow rose 81% year-to-date to $439 million, while Intel’s fell to a negative $3 billion. AMD’s growth is mainly due to its heavy investment in AI, which has paid off by boosting chip sales.

The company reported its Q2 2024 earnings on July 30. Revenue rose 9% year over year to $6 billion, beating Wall Street expectations by $120 million. The quarter proved that AI is now AMD’s high-revenue business by a wide margin, with its data center segment accounting for nearly 50% of its total revenue.

Meanwhile, data center sales rose 115% in Q2 due to increased demand for its AI graphics processing units (GPUs). The period also delivered a 49% increase in customer revenue, significantly increasing central processing unit (CPU) sales.

AMD didn’t get the head start in AI that Nvidia did and had some catching up to do. However, its latest quarterly results indicate massive potential in the industry and an opportunity to carve out a profitable long-term position as it steals market share from the market leader.

Is Intel or AMD the best AI stock?

AMD’s stock is up more than 3,000% over the past decade, while Intel’s is down 37%. Intel has a promising outlook in AI and could deliver significant gains as it implements its plans. However, there is currently too much uncertainty about its future compared to AMD.

AMD is more financially stable and boasts a more established role in artificial intelligence than Intel. In addition to recent growth in its data center division, AMD stock is too good to pass up.

Data by YCharts

Furthermore, this chart shows AMD’s stock trading at a better value than Intel’s. AMD’s considerably lower price-to-earnings ratio suggests its stock is a bargain compared to Intel. Along with a stronger position in AI, AMD is a more reliable investment and a stock worth considering this month for anyone looking to invest in the burgeoning AI market.