Over the past year, increased interest in artificial intelligence (AI) has highlighted several tech stocks that could see major gains as the sector grows. Advanced microsystems (NASDAQ: AMD) has seen its stock surge 150% since the start of 2023, driven largely by investor enthusiasm for AI. AMD’s second-largest market share in graphics processing units (GPUs) has Wall Street optimistic, as similar offerings from Nvidia have disappeared from the shelves due to increased demand for these high-power chips.
However, poor quarterly results, along with a soaring share price, have caused AMD’s stock to plummet. The company has not seen a sufficient return on its investment in AI, suggesting there may be better options to support this high-growth sector.
This chart uses price-to-earnings (PE) ratios to compare the valuations of some of the biggest names in AI. AMD stock is by far the worst value, with a PE of 238. However, two companies stand out as bargains relative to their peers: Intel (NASDAQ:INTC) And Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG).
These companies have rapidly expanding AI projects that could prove very profitable in the long run, with one investing in AI chip manufacturing and the other rapidly expanding into AI software.
So, forget AMD in 2024 and consider buying one of these AI stocks instead.
1. Intel: ensuring growth in several areas of its business
Intel investors haven’t had it easy in recent years, with its stock down 35% since 2019. The company was once the biggest name in the chip market, dominating manufacturing and enjoying a lucrative partnership with Apple Intel became the leading chip supplier for its Macs. However, its struggles to keep up with competition from AMD and Nvidia caused Intel to fall and lose market share.
Yet sometimes the best test of a company is how it responds to challenges, and recent developments suggest Intel could make a strong comeback in the years ahead. The chipmaker has increased its market share in central processing units (CPUs) for three consecutive quarters. Since Q4 2023, Intel’s market share in processors has increased from 61% to 64%, while AMD’s has fallen from 36% to 33%.
Moreover, Intel’s recent results further underscore its incremental improvements. In the first quarter of 2024, the company’s revenue increased 9% year over year to $13 billion. The company benefited from a 31% increase in customer revenue, which represents an increase in consumer sales. At the same time, its data center and AI segment saw a 5% increase in revenue, with operating income reaching $184 million after the company posted a loss of $69 million the year before.
Intel is restructuring all areas of its business to prioritize long-term profit growth. The company is refocus its economic model around AI and manufacturing, with plans to build at least four factories in the United States and more overseas. Intel wants to become the country’s top AI chipmaker, which could help it capitalize on surging demand. GPU Request throughout the industry.
With positive signs of growth and a favorable share price, it is worth considering Intel stock over AMD in 2024.
2. Alphabet: The Most Profitable Way to Invest in AI Software
Alphabet is home to some of the most recognized brands thanks to products like Android, YouTube, and Google’s many offerings. Alphabet’s success has made it the fourth most valuable company in the world, with a market capitalization exceeding $2 trillion.
The tech giant has proven to be one of the most reliable long-term investments. This year alone, Alphabet has outperformed many of its rivals in terms of stock growth (as shown in the chart above). Yet its price-to-earnings ratio is the lowest of these companies, indicating that it is trading at a premium. Additionally, Alphabet has the lowest share price of these tech companies, making its stock potentially the most accessible.
Alphabet, which is trading at a bargain price, has considerable potential in the field of artificial intelligence. The company was an early investor in the sector, introducing AI into its search engine in 2001. Then, in 2016, the tech giant became an AI-focused company, well ahead of many of its competitors. Its AI research subsidiary Google DeepMind is the engine of the company’s innovation.
At the same time, Alphabet’s recently launched AI model, Gemini, could elevate its entire position in the industry by bringing generative upgrades to its entire product lineup.
Alphabet likely has a bright future in tech and is simply too good to ignore at its current price, making it a must-buy in 2024 and a better option than AMD.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Amazon’s Whole Foods Market, 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 Nvidia. 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 August 2024 $35 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a position in the stocks mentioned and recommends the following options: long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short August 2024 $35 calls on Intel, and short January 2026 $405 calls on Microsoft. disclosure policy.
Forget AMD in 2024: 2 Artificial Intelligence (AI) Stocks to Buy Instead was originally published by The Motley Fool
