Tech stocks have been on a wildfire streak of creating millionaires, accentuated by the Nasdaq-100 Technology Sector soaring 51% from last May. The fervor for artificial intelligence (AI) has sent numerous stocks skyrocketing, particularly with the advent of OpenAI’s ChatGPT, illuminating the technology’s vast potential to revolutionize myriad industries.
As a prominent chipmaker, Advanced Micro Devices (NASDAQ: AMD) has enjoyed a perch atop the bull run. Its stock has ascended by 61% in the past year. The company’s allure lies in securing the second-largest market share in graphics processing units (GPUs), essential for AI model training, and substantial investments in its AI portfolio.
Data by YCharts; PE = price to earnings.
AMD has minted numerous millionaires over the years. However, its recent bullish surge has left its stock trading at almost 44 times its earnings, exhibiting a lack of intrinsic value. A comparative analysis pits Microsoft (NASDAQ: MSFT) and Intel (NASDAQ: INTC) as potentially superior-valued alternatives, both strategically positioned in the AI domain.
So, why settle for AMD when the fertile ground for millionaire-making stocks awaits with these two alternatives?
Intel’s Renaissance
Intel shares have catapulted over 110,000% since the company’s IPO in 1971, undoubtedly birthing numerous millionaires along the way. Despite a lackluster decade with its stock up only about 20%, Intel has been weathering setbacks since 2014, including dwindling CPU market share, the termination of a lucrative Apple partnership, and economic headwinds. Presently, Intel presents a ripe opportunity for discerning investors.
The company is orchestrating a potent resurgence over the ensuing decade, potentially witnessing remarkable stock escalation. Intel recently unveiled a “fundamental shift” in its manufacturing approach, eyeing an internal foundry model to rival behemoths like Taiwan Semiconductor.
Intel forecasts savings of $8 billion to $10 billion by 2025, charting a course towards achieving adjusted gross margins of 60%. As manufacturing is a capital-intensive affair, returns on investment are anticipated over time.
The chip giant’s first-quarter results augur well for its trajectory. While foundry revenue dipped by 10% year over year, operating income in the segment surged from $22 million in 2023 to $482 million this year.
Beyond manufacturing, Intel is immersed in a robust AI investment drive. The company introduced new AI chips this year, witnessing promising advances in its data center and AI segment. In Q1, segment revenue rose 4% year over year, while operating income soared from a negative $69 million to a profit of $184 million.
Intel’s journey to growth is brimming with potential, making it a compelling investment option before the train leaves the station. Moreover, Intel’s markedly lower forward price-to-earnings (P/E) ratio positions it as a bargain compared to AMD.
Microsoft’s Momentum
Microsoft has scaled dizzying heights in the past year, with its stock surging 35%, elevating its market cap beyond $3 trillion, toppling Apple as the world’s most valuable company.
The tech titan has galvanized investors with its proactive AI ventures. A visionary move saw Microsoft inject $1 billion into OpenAI back in 2019, a figure ballooning to about $13 billion subsequently. This partnership confers exclusive access to cutting-edge AI models, endowing Microsoft with a competitive edge against Amazon and Alphabet.
On April 25, Microsoft announced robust second-quarter earnings, reporting an 18% year-over-year revenue surge to $62 billion. Multiple divisions showed growth, with the productivity and business processes segment witnessing a 12% sales uptick and the AI-centric Intelligent Cloud section registering a 21% revenue boost.
Microsoft’s strides in integrating AI across its suite of products and services have been paying dividends. Notably, the incorporation of generative features into the Office suite, expanded AI tools on Azure, and leveraging ChatGPT in Bing’s search engine underscore Microsoft’s AI commitment.
Microsoft’s history of wealth creation through stock appreciation, soaring about 950% in the past decade, combined with recent growth and a formidable AI stance suggest that the company is poised for further ascension. Laden with better value than AMD, Microsoft’s stock beckons as a lucrative investment opportunity at present.
Should You Bet $1,000 on Intel Today?
Before diving into Intel’s stock, contemplate this:
The Motley Fool Stock Advisor team recently pinpointed what they deem the 10 best stocks for investors to nab presently… and Intel didn’t make the cut. These 10 selected stocks hold promise for monumental returns in the years ahead.
Reflect on the time when Nvidia graced this list on April 15, 2005… had you invested $1,000 upon recommendation, you’d be sitting on $566,624 today!*
Stock Advisor furnishes investors with a roadmap to success, proffering insights into portfolio construction, regular analyst updates, and two fresh stock picks monthly. The Stock Advisor service has outpaced the S&P 500 by more than fourfold since 2002*.
*Stock Advisor returns as of May 13, 2024
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.