Chip stocks have soared since last year alongside a boom in artificial intelligence (AI). As an industry leader, Advanced microsystems‘ (NASDAQ:AMD) the stock is up 28% since last June, outperforming the S&P500This is an increase of 24% over the same period. The company has rallied investors with a promising role in graphics processing units (GPUs), the chips needed to train AI models.
But while the growth in AMD stock has benefited existing investors, it has also increased the price of entry for new ones.
This chart uses price-to-sales (P/S) and forward price-to-earnings ratios to compare AMD’s valuation to two other AI companies, Intel (NASDAQ:INTC) And Amazon (NASDAQ:AMZN). For both metrics, Intel and Amazon offer better value than AMD. So while AMD likely has a bright future in AI in the long term, it might be worth investing in alternative AI stocks that offer better value.
So forget AMD and consider buying one of these artificial intelligence stocks instead.
1.Intel
You might be surprised to see Intel on this list after its performance over the past decade. The company is emerging from a crisis that has seen its shares plunge 47% since 2021, alongside falling revenue and a loss of market share in what was once its bread and butter, the CPU market. processing (CPU).
However, a recent restructuring indicates that it is not over for Intel and that the company could be on the road to recovery. Meanwhile, its stock is currently one of the biggest deals in AI, making it hard to ignore as a long-term option.
Intel is preparing to invest $100 billion in building chip manufacturing plants in the United States. The company has secured nearly $20 billion in federal grants and loans, hoping to get another $25 billion in tax breaks. The chipmaker is supported in part by the federal CHIPS Act, a 2022 initiative aimed at increasing capacity at U.S. foundries.
Intel’s industrial expansion is particularly promising for its Potential of AI. CEO Pat Gelsinger expects its next factory in Ohio to become “the world’s largest AI chip manufacturing site” as soon as 2027. Meanwhile, prioritizing chip manufacturing differentiates Intel from its competitors like Nvidia and AMD, which focus on design rather than manufacturing. Intel could see its profits rise significantly in the coming years as the growth of AI continues to increase demand for chips.
The company still has a long way to go before seeing significant returns on its heavy investment, but for investors, it could be worth getting in on the ground floor to potentially profit from its return.
2. Amazon
Amazon is one of the most interesting AI stocks right now, with its cloud platform, Amazon Web Services (AWS), carving out a powerful role in the industry. At the same time, the company’s P/S ratio of around 3 makes it a bargain despite its share price rising 45% over the past 12 months.
The retail giant’s business has boomed since last year. Amazon’s operating profit rose more than 1,300%, with free cash flow doubling to nearly $46 billion. The company posted significant gains in its e-commerce segments, which benefited from lower inflation and cost-cutting measures taken by management.
However, all eyes have been on AWS in recent months. Its leading 31% market share in cloud computing potentially gives it an advantage in AI, which the company is taking full advantage of by expanding AWS. Amazon is increasing its cloud capacity by investing billions in building more data centers around the world.
The tech giant has a 15-year plan to develop AWS infrastructure in Taiwan. Meanwhile, Amazon has committed to investing $13 billion in a similar project in India, which will expand its cloud infrastructure in one of the world’s fastest-growing data center markets.
In addition to large cash reserves and a dominant position in the cloud market, Amazon’s stock is worth considering because of the range of ways it could boost its business with generative technology. Expanding AI capabilities could allow it to better analyze purchasing trends and more accurately recommend products on its retail site, improve shipping logistics, expand its product offerings AI on AWS and offer more targeted advertising on its streaming service, Prime Video.
Amazon is on a promising growth trajectory in the AI ââspace and is worth investing in AMD in June.
Should you invest $1,000 in Intel right now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Daniel Cook has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Advanced Micro Devices, Amazon and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool has a disclosure policy.
Forget AMD: 2 Artificial Intelligence (AI) Stocks to Buy Instead was originally published by The Motley Fool
