Better Buy: AMD vs. Intel After Intel's Monster Run

For most of the past decade, Advanced Micro Devices (NASDAQ: AMD) and Intel (NASDAQ: INTC) were moving in opposite directions. AMD kept taking market share in processors and pushed hard into artificial intelligence (AI) chips, while Intel struggled through manufacturing delays and management turnover. Then Intel's stock came alive. Shares have surged more than 500% over the past year.

AMD has been a winner too, with its stock up more than 300% over the same stretch. But Intel's run has been the faster of the two, narrowing a gap that not long ago looked permanent.

So after a rally like that, which of these chip rivals is the better buy today?

Image source: The Motley Fool.

Intel: a comeback

Under CEO Lip-Bu Tan, who took over a little more than a year ago, Intel has posted revenue above its own expectations for six consecutive quarters. First-quarter revenue rose 7% year over year to $13.6 billion, and its data center and AI segment grew 22% year over year to $5.1 billion as demand for its Xeon server processors outran supply.

The bigger driver is a shift in how AI gets built. As workloads move from training huge models to running them (inference) and to newer agentic AI that carries out tasks on its own -- more of the work falls to the CPU rather than the graphics chip.

"Customers are deploying server CPUs alongside accelerators in a ratio that is moving back toward the CPU," said Tan during the company's first-quarter earnings call.

And the manufacturing side of Intel's business has, too.

Intel's foundry business, which makes chips for Intel itself and a growing list of outside customers, brought in $5.4 billion in the quarter. In addition to this good news about the company's turnaround, a 10% stake the U.S. government took last year and a recently reported but company-unconfirmed chip-making collaboration with Apple have done much of the work rerating the stock higher.

But the foundry is still losing money, with a $2.4 billion operating loss, and outside customers accounted for just $174 million of that $5.4 billion. Intel also lost money on a generally accepted accounting principles (GAAP) basis, reporting a loss of $0.73 per share after restructuring and impairment charges (its non-GAAP earnings per share of $0.29 was partly supported by a one-time gain).

AMD: the purer growth story

AMD is chasing the same opportunity, but from a position of strength. Its data center segment, home to both its EPYC server processors and its Instinct AI accelerators, generated a record $5.8 billion in the first quarter -- up 57% year over year.

And AMD's total revenue rose 38% to $10.3 billion.

Profits also surged. Adjusted earnings per share climbed 43% to $1.37. And free cash flow more than tripled to a record $2.6 billion.

"These results mark a clear inflection in our growth trajectory and a structural shift in our business," said AMD CEO Lisa Su during the company's first-quarter earnings call.

Further, this momentum is backed by impressive customer commitments.

AMD has signed multiyear agreements with OpenAI and Meta Platforms to deploy up to six gigawatts of its Instinct chips for Meta, with the first of its next-generation MI450 accelerators set to ship in the second half of 2026. And AMD is also benefiting from the same agentic-AI demand for server processors that is fueling Intel.

The difference is that AMD is doing all this while generating a substantial profit and robust cash flow.

The better buy

So, which stock wins?

To me, AMD looks like the better buy -- and valuation is what tips it.

After its monster run, Intel's stock trades at a forward price-to-earnings ratio of more than 120 (its price measured against projected earnings over the next year). AMD, growing faster and with more profits, trades at about 73 times forward earnings.

That said, this doesn't discredit Intel's turnaround. Its case for the CPU in the AI era is credible, and if the foundry keeps signing outside customers, the stock could keep climbing. But at more than 120 times forward earnings, almost everything has to go right to justify the price.

Of course, AMD isn't cheap either, and its story leans on the AI build-out continuing at a blistering pace for years to come. Indeed, at its high valuation, a sharp slowdown in data center spending could lead to a steep drop in the stock price. But for an investor choosing between the two today, AMD ultimately offers faster growth and cleaner profits at half the valuation.

Daniel Sparks and his clients have positions in Apple. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Intel, and Meta Platforms. The Motley Fool has a disclosure policy.