As the tech realm becomes increasingly embroiled in the throes of artificial intelligence (AI), the battle for supremacy among chip manufacturers has intensified. The demand for AI services has electrified the market, with companies vying for dominance in the lucrative chip sector. Notably, the development of hardware such as GPUs holds the key to training AI models, presenting a compelling opportunity for companies specializing in chip fabrication.
The Rise of AI Dominance: Nvidia vs. Intel vs. AMD
While Nvidia has soared to the summit in AI GPUs, propelling its stock prices and earnings skyward in recent times, all eyes are now on industry stalwarts Intel (NASDAQ: INTC) and Advanced Micro Devices (NASDAQ: AMD). These contenders have thrown down the gauntlet with competitive chip offerings, positioning themselves for substantial gains amidst the expanding AI landscape.
Intel’s foray into AI has been marked by the launch of novel AI accelerators, signaling a strategic move to cement its status as a premier player in the domain of AI chip design. Concurrently, AMD’s robust market share in GPUs positions it favorably for a substantial role in the AI space over the long haul, potentially bridging the supply chasms that its competitors may struggle to address.
While these companies stand at the initial stages of their AI odyssey compared to Nvidia, this nascent stage could indicate a promising trajectory for their future prospects in the years to come. Let’s delve deeper into the comparison between these chip giants and discern whether Intel or AMD emerges as the premier AI stock at present.
Intel’s Ascension
Intel has witnessed a modest uptick of 3% in its stock value over the last month, garnering support from Wall Street enthusiasts as they rally behind its long-term potential. This growth provides a welcome reprieve following a tumultuous year of declines, which had seen the company’s share price plummet by 7% since July of the previous year. Notwithstanding investors’ concerns stemming from several lackluster quarters, Intel’s recent strategic maneuvers portray a company dedicated to playing the enduring game, with substantial investments geared towards reaping significant gains over the ensuing decade.
Crucially, Intel is strategically positioning itself in the AI realm by diversifying its chip offerings and making substantial investments in manufacturing capabilities. Setting itself apart from rivals like AMD and Nvidia, Intel’s competitive pricing strategy sees its chips priced at approximately a third of the prevailing market rates for comparable products.
However, the most promising stride in Intel’s trajectory lies in its ambitious venture to establish itself as a premier player in the foundry market. With the semiconductor foundry segment valued at around $107 billion in 2022 and expected to burgeon twofold to $232 billion by 2032, Intel’s strategic expansion into chip fabrication across the U.S. could bear fruit, especially amid the skyrocketing demand for GPUs.
Advanced Micro Devices: A Promising Pursuit
AMD’s recent reorientation towards prioritizing AI in its business model has catapulted the company into the spotlight. Making significant inroads into the industry, AMD has unveiled its own suite of AI GPUs while forging partnerships with tech behemoths like Microsoft and Meta Platforms.
Moreover, reports from Tom’s Hardware indicate that AMD is entertaining substantial inquiries regarding the establishment of a prodigious AI cluster housing over 1.2 million GPUs—an ambitious endeavor that could substantially augment AMD’s bottom line. While the company brims with promise in the AI sector, recent earnings reports have painted a mixed picture. Despite a 2% year-over-year revenue uptick to surpass $5 billion in the first quarter of 2024, AMD faced over 40% declines in its client and gaming segments, somewhat tempering its AI ambitions with the imperative of delivering robust financial results.
Weighing the Options: Intel vs. AMD for AI Sector Supremacy
Though Intel and AMD adopt divergent approaches to AI prominence, Intel’s comprehensive chip portfolio and robust investments in manufacturing might position it favorably for expansion in the industry compared to AMD. Notwithstanding AMD’s steadfast pursuit to rival Nvidia, the latter’s commanding 90% market share in AI GPUs presents a formidable barrier, indicating that Intel might have an edge in fortifying its AI foothold vis-à-vis AMD.
Furthermore, a valuation comparison between Intel and AMD underscores the potential bargain offered by Intel’s shares, with lower price-to-earnings and price-to-sales ratios suggesting a compelling value proposition. Coupled with Intel’s ambitious strides into the foundry market, the company emerges as a prudent choice for investors eyeing the AI sector this July, presenting a more enticing prospect compared to AMD.
Before diving into Intel stock, investors should factor in the insights from the Motley Fool Stock Advisor analyst team, who have identified the 10 best stocks for promising returns. While Intel might not feature on their list, the referred stocks hold the promise of significant dividends in the forthcoming years, echoing the exponential returns witnessed by Nvidia when it made the cut back in 2005—an investment that would have burgeoned from $1,000 to a staggering $786,046 by now!*
Stock Advisor paves the way for investors to navigate the treacherous waters of the stock market, offering tailored advice on portfolio construction, frequent updates from analysts, and bi-monthly stock recommendations. Boasting returns that have outstripped the S&P 500 by more than fourfold since 2002*, their valuable insights steer investors towards profitable endeavors.
*Stock Advisor returns as of July 2, 2024