Both of these companies are rapidly expanding in the AI space, but one trades at a much better value.
Over the past year, it feels like almost every headline has focused on artificial intelligence (AI) in some way. Interest in this technology is skyrocketing, with countless companies reimagining their businesses around AI.
The arrival of OpenAI's ChatGPT has led to a surge in demand for similar services across a variety of industries, leading to a number of exciting investment opportunities. In fact, the Nasdaq Composite Index is up 29% over the past 12 months, with growth largely driven by excitement around AI.
However, this new market is still in its infancy, suggesting it's never too late to invest. And chip stocks appear to be some of the best options. These companies are developing the hardware that enables AI, and demand for chips is unlikely to slow down anytime soon.
There are two attractive AI chip stocks right now. intel (INTC -2.40%) and Advanced Micro Devices (AMD -5.44%). Both chipmakers are expanding their positions in this emerging market, which could bring significant long-term benefits. So let's take a look at these two businesses to determine whether Intel or AMD is the better AI stock right now.
intel
If you're just looking at Intel's recent performance, you might be wondering why Intel should be potentially considered over AMD. Intel's stock price has fallen nearly 45% since 2021 due to repeated hits to its business.
The company has long been king of the chip market, with dominant market share in central processing units (CPUs) and lucrative partnerships. apple. But the boom in AI has led the chip industry to pivot to graphics processing units (GPUs), while demand for CPUs has slowed. Meanwhile, Intel no longer has the security of supplying its chips to Apple, and the iPhone company announced a change in 2020 to using its own designed chips instead of Intel.
In addition to unexpected macroeconomic headwinds that caused weak demand in the PC market in 2022, Intel is at a disadvantage.
However, recent challenges are why Inter may hold up as a long-term option. The company is investing heavily in his AI, and earlier this month he launched the Gaudi 3 AI GPU, promising “an average of 50% better inference and an average of 40% more power efficiency” than the market leader. doing. NvidiaGPU.
Furthermore, the company is leveraging its overwhelming position in CPUs to expand its market. The Xeon 6 processor enhances his AI capabilities and provides him 4 times the performance of 2nd generation Xeon processors.
Intel has a long way to go before it regains its former glory, but if the stock collapses, its stock could become one of the most valuable long-term investments in AI.
Advanced Micro Devices
AMD stock has risen 68% in the last year, rallying investors to its potential in AI. The company has benefited from growth in empathy as rival Nvidia's business has exploded in the last year.
Nvidia's AI GPUs have been in stores since early 2023, giving it a head start on the market over AMD and Intel and reaping significant benefits. But AMD is moving to match its new valuation and secure a position in the lucrative AI market.
Similar to Intel, AMD has also launched its own AI GPU aimed at competing with Nvidia's hardware. However, AMD doesn't just want Nvidia's GPU market share. The company is looking to lead its own field in AI with its work on AI-powered personal computers.
On April 16th, AMD launched Ryzen Pro 8000 for desktops and laptops. According to PCWorld, the new generation of chips will make AMD the only CPU developer “to bring AI-powered NPUs to business desktop PCs.”
The company is poised for impressive growth over the next decade as demand for AI continues to soar.
Which is a better AI stock: Intel or AMD?
Intel and AMD have exciting prospects for AI and could be an asset to any portfolio in the long run. However, several key valuation metrics suggest that Intel is trading at a much better value than AMD.
Data by YCharts.
This graph above shows that Intel's forward price-to-earnings (P/E) and price-to-sales (P/S) ratios are significantly lower than AMD's. These metrics help determine the value of a stock because they take into account a company's financial health relative to its stock price.
The forward P/E ratio is calculated by dividing a company's current stock price by its expected future earnings per share. P/S, on the other hand, is market capitalization divided by last 12 months' earnings. For both metrics, the lower the number, the better the value.
As a result, Intel's low forward P/E and P/S indicate that the company's stock is undervalued compared to AMD. And Intel's growing position in the AI space makes sense at this point. However, it's not a bad idea to keep an eye on AMD and attack it when the time is right.
Dani Cook has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, and Nvidia. The Motley Fool recommends Intel and recommends options for long January 2025 $45 calls on Intel and his short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
