AMD or Intel: 1 Chip Stock Is the Clear Winner

Advanced Micro Devices (NASDAQ: AMD) and Intel (NASDAQ: INTC), two of the leading semiconductor companies, are capitalizing on the artificial intelligence (AI) revolution. Both stocks have performed well as a result. AMD's shares are up 158% this year, while Intel's have gained 69%, as of writing. Both companies could continue to ride the AI tailwind, provided infrastructure spending continues to grow. But which of these two chip stocks is the better buy right now?

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Comparing their financial results

AMD and Intel have both been posting excellent financial results. Let's start with the latter. Intel's third-quarter revenue increased by 21% year over year to $16.5 billion. Gross profit jumped 36% year over year with a 44.1% non-GAAP margin, versus the margin of 40% reported in the prior-year quarter. Intel's non-GAAP net earnings per share (EPS) were $0.52, up 126% year over year. Importantly, the company's data center and AI segment posted $7.3 billion in revenue, up 78% year over year.

This business is now the company's most important growth driver, and it should remain so over the medium term. In fact, Intel's Client Computing and Physical AI Group segment posted $8.1 billion in revenue, down 5% year over year. For the fourth quarter, Intel expects revenue of $15.5 billion at the midpoint, representing a 13% year-over-year increase. Its projected non-GAAP EPS of $0.25 would increase 67% from the year-ago period.

Now turning to AMD, the company's third-quarter revenue increased 45% year-over-year to $13.4 billion. Gross profit was up 51% to $7.2 billion, with a 54% gross margin, versus the 52% margin reported in the year-ago period. AMD's non-GAAP EPS jumped 74% year over year to $2.09. The company's data center segment did much of the heavy lifting, recording $8.5 billion in revenue, up 97% from the prior-year quarter.

And AMD's fourth-quarter revenue guidance of $17 billion at the midpoint would represent year-over-year revenue growth of 66%. So, by next quarter, AMD could generate higher revenue than Intel while also growing its revenue faster and boasting stronger gross margins. True, Intel's EPS is growing faster, but AMD's is higher, and the company also boasts stronger net profit margins.

And within their all-important data center businesses, AMD is growing much faster as well. So, overall, AMD's financial results look stronger right now. The company wins this category hands down.

Which one has the better outlook

Looking beyond the fourth quarter, both AMD and Intel could benefit from soaring demand for CPUs (central processing units) driven by the advent of agentic AI. As AMD has argued, agentic AI could shift the CPU-to-GPU (graphics processing unit) ratio in the industry from as much as 1-to-8 in the early stages of the AI revolution to something closer to 1-to-1.

AMD and Intel are both leaders in the CPU market, but AMD has made market share gains in recent quarters. One reason AMD has gained on Intel is that it has executed better. AMD chose to outsource chip manufacturing and has avoided many of the delays and other problems Intel's (mostly) internal manufacturing strategy has created. Intel is making changes. But for now, AMD seems to be better positioned to ride the agentic AI tailwind over the next five years.

Some valuation considerations

So far, AMD has won two out of three categories: financial results and outlook. But which company seems more reasonably valued? AMD is trading at 30.7x forward earnings, versus Intel's 34.4x and an average of 17.1x for information technology stocks. Both stocks are arguably worth a premium, given sustained demand for their hardware which should help them maintain their recent momentum over the next five years.

AMD has estimated that the CPU addressable market will grow at a compound annual rate of 50% through 2030, reaching about $220 billion by then. And even in the valuation category, AMD appears to be the winner. So, AMD is a much better stock to buy right now than Intel.

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Intel. The Motley Fool has a disclosure policy.