Better Artificial Intelligence Stock: Intel vs. AMD

Data from Grand View Research shows the artificial intelligence (AI) market hit nearly $200 billion in 2023 and is projected to have a compound annual growth rate of 37% until at least 2030. That trajectory will see the industry reach close to $2 trillion, indicating it’s not too late to invest.

AI stocks have captivated Wall Street over the last year, with bullish investors boosting the Nasdaq Composite by 27% since last June. Chip stocks enjoyed some of the biggest gains because these companies are crucial to the industry’s development as providers of the hardware necessary to train and run AI models. As a result, it could be worth adding a chip stock to your portfolio just as demand is soaring.

Two of the most attractive options are Intel (INTC 1.05%) and Advanced Micro Devices (AMD 0.65%). These companies will likely profit from the tailwinds of AI for years as more companies enter the industry and require their powerful hardware.

Let’s compare these two chipmakers and determine whether Intel or AMD is the better AI stock this June.

Intel

Intel has lagged behind in AI compared to rivals like Nvidia and AMD. But recent developments show the company hasn’t given up and might deliver major gains in the coming years. It could be worth investing in Intel now while it’s still getting started in AI and potentially reap the rewards over the long term.

On June 4, Intel revealed new AI chips for data centers, just days after similar announcements from Nvidia and AMD. According to Intel CEO Pat Gelsinger, the company’s Xeon 6 processors have improved performance and power efficiency for intensive workloads compared to the previous generation.

In the same presentation, Intel announced the cost of its Gaudi 3 AI accelerator, which is priced lower than similar products from its competitors. AI chips have become costly, especially from market leaders like Nvidia. If Intel can offer competitive price to performance, it could attract more clients to its AI offerings and take market share from Nvidia.

Besides new chips, Intel is setting itself apart from the competition by heavily investing in manufacturing. It’s building chip plants throughout the U.S., with Gelsinger recently saying its Ohio location would be the “AI systems fab for the nation.”

Intel has an exciting outlook in AI, both in chip design and manufacturing. The company is an attractive long-term prospect that could deliver significant gains as it expands its business.

Advanced Micro Devices

Like Intel, AMD is working hard to match Nvidia in AI. CEO Lisa Su told reporters at the Computex technology trade show in Taipei this month, “AI is clearly our No. 1 priority as a company, and we have really harnessed all of the development capability within the company to do that.”

Last year, the company announced new AI graphics processing units (GPUs) and unveiled its latest AI chip, the MI325X accelerator, this month. The new chip will be available in the fourth quarter of 2024, and the company is following Nvidia’s recent decision to shift to annual chip updates rather than releasing upgrades every two years, as was previously done.

At the same conference, AMD announced its MI350 series of chips, which will launch in 2025 and be based on an entirely new architecture. AMD has said the new chip will perform 35 times better in inference, granting it significantly improved AI capabilities.

AMD still has a long way to go before making a significant dent in Nvidia’s AI market share, but recent earnings show it could be on the right track. In the first quarter of 2024, the company’s AI-driven data center segment posted revenue growth of 80% year over year thanks to increased GPU sales.

Is Intel or AMD the better AI stock?

Intel and AMD are in steep competition with each other and market leader Nvidia in AI. The industry’s vast potential and soaring chip demand indicate there could be room for each of these companies to find their niche and profit from the generative technology.

However, Nvidia’s spot at the top of the market and Intel’s venture into manufacturing make it feel like these companies could have more secure positions in AI over the long term than AMD. The chart below indicates that Intel is trading at a far better value than both companies, with the lowest forward-price-to-earnings ratio and price-to-sales ratio among the three most prominent chipmakers.

Data by YCharts; PE = price to earnings, PS = price to sales.

Given its recent AI chip releases and expansion into manufacturing, Intel’s stock is the better choice over AMD and a screaming buy right now for long-term investors.