These companies are trading at a better value than AMD and have massive growth potential.
Tech stocks have probably made more than a few millionaires recently, with the Nasdaq-100 Technology Sector up 51% since last May, for example. Increased interest in artificial intelligence (AI) has caused countless stocks to skyrocket. The launch of OpenAI’s ChatGPT highlighted just how far the technology has come and its potential to boost many industries.
As a leading chipmaker, Advanced Micro Devices (AMD 1.14%) has been a top beneficiary of the bull run. Its stock has climbed 61% over the last year. The company has rallied investors with the second-largest market share in graphics processing units (GPUs), the chips necessary to train AI models, and with heavy investment in its AI offerings.
Data by YCharts; PE = price to earnings.
AMD has made a lot of millionaires over the years. But a recent rally means its stock is trading at nearly 44 times its earnings, indicating it isn’t offering much value. The chart above shows that Microsoft (MSFT -0.18%) and Intel (INTC -0.62%) are potentially better-valued alternatives, and both have promising positions in AI.
So forget AMD and consider buying one of these two millionaire-maker stocks instead.
1. Intel
Shares in Intel have risen more than 110,000% since the company’s initial public offering in 1971, likely creating many millionaires along the way. But it’s been a while since Intel has made anyone rich, with its stock up around 20% over the last decade.
The company has suffered repeated hits to its business since 2014, including decreased market share in central processing units, the end of a lucrative partnership with Apple, and an economic downturn. So now could be an excellent time to consider investing in Intel.
The company is making moves to come back strong over the next decade and could see its stock soar over the long term. Last year, Intel announced a “fundamental shift” to its manufacturing, with plans to adopt an internal foundry model that would see it rival companies like Taiwan Semiconductor.
Intel said the move would save it between $8 billion to $10 billion by 2025 and help it reach adjusted gross margins of 60%. Manufacturing is a costly business, so it will take time to see returns on its investment.
But first-quarter earnings suggest Intel is moving in the right direction. During the quarter, foundry revenue decreased by 10% year over year. Yet operating income in the segment soared from $22 million in 2023 to $482 million this year.
Besides manufacturing, Intel is investing heavily in AI. The company launched new AI chips this year and delivered promising gains in its data center and AI segment in its latest quarter. In the first quarter, revenue in the segment rose 4% year over year, while operating income increased from a negative $69 million to a profit of $184 million.
The chipmaker still has a lot of work ahead, but it’s on a growth path that could be worth investing in before it’s too late. Meanwhile, Intel’s significantly lower forward price-to-earnings (P/E) ratio makes it a bargain compared to AMD.
2. Microsoft
Microsoft has reached record heights over the last year. Its stock rise of 35% has seen its market cap reach more than $3 trillion, surpassing Apple as the world’s most valuable company.
The company has rallied investors by getting a head start in AI. It seemingly had the foresight of the century when it invested $1 billion in OpenAI in 2019, an investment it has since increased to about $13 billion. The partnership has granted Microsoft exclusive access to some of the most advanced AI models in the market and given it a leg up on rivals Amazon and Alphabet.
On April 25, Microsoft posted earnings for the second quarter (ending in March). Revenue rose 18% year over year to $62 billion. Microsoft saw growth in multiple segments, with its productivity and business processes division posting a 12% year-over-year increase in sales and its AI-focused Intelligent Cloud segment delivering revenue gains of 21%.
Over the last year, the company integrated AI into many of its products and services, including adding generative features to its Office productivity suite, expanding its AI tools on Azure, and basing parts of its search engine Bing on ChatGPT. Recent earnings indicate the expansion is paying off.
Microsoft has made a lot of millionaires over the years, with its stock soaring about 950% over the last decade. And recent growth and a powerful position in AI suggest it’s not done yet. So, at a better value than AMD, the stock is a screaming buy right now.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Microsoft, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.