Chip stocks have been absolutely pummeled recently, with Advanced Micro Devices (NASDAQ: AMD) and Intel (NASDAQ: INTC) two of the biggest losers over the past month. Meanwhile, the strong Democratic showing in the midterm elections put the artificial intelligence (AI) infrastructure build-out on notice.
Despite the political shift, I wouldn’t expect there to be a major impact on overall AI infrastructure growth in the coming years, with hyperscalers being able to navigate the current environment and shifting some projects overseas. However, between AMD and Intel, I think the clear winner is likely to be AMD. Here’s why.
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AMD
Advanced Micro Devices has been one of the hardest-hit stocks in the semiconductor pullback. However, the company is riding two powerful waves in inference and agentic AI that are just starting to kick in, and its new Helios rack solution could be a game changer.
Helios is AMD’s turnkey AI infrastructure solution that incorporates its graphics processing units (GPUs), central processing units (CPUs), and networking components into a single system. The system contains 72 GPUs and 18 CPUs per rack and is designed to provide the “lowest cost per token” to help reduce overall computing costs. The system has already started being rolled out to key customers, including OpenAI, Meta Platforms, Microsoft, Anthropic, and Oracle, and OEM (original equipment manufacturer) and ODM (original design manufacturer) partners will also soon begin to ship Helios.
AMD has two large deals in place with OpenAI and Meta Platforms for 6 gigawatts of compute capacity each. With each Helios system costing between $5 million and $5.5 million and consuming between 225 kilowatts and 245 kilowatts of power, each deal would be worth approximately $120 billion. Meanwhile, Anthropic’s 2-gigawatt deal would be worth around $40 billion, with Microsoft and Oracle as smaller customers.
At the same time, the company is seeing huge demand for its server CPUs, given that these chips are needed to help manage AI agents. Its CPUs are helping run Meta’s new Muse AI agents, and the company sees server CPUs becoming a $220 billion market by 2030.
As a result, AMD is projecting growth to soar next year, with it recently forecasting revenue to surge 80% in 2027. The pullback has dropped the stock to a forward price-to-earnings (P/E) ratio of around 9 times its 2030 analyst estimates, giving it plenty of room to run the next three years.
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Image source: The Motley Fool. Intel
While AMD has been the victim of a broader semiconductor stock sell-off, much of Intel’s wounds are self-inflicted. This is due to the company’s still-outsized exposure to the PC market, which is seeing weak demand as high memory costs have caused computer makers to raise prices, slowing demand.
Intel’s client computing and physical AI group (CCPG) remains its largest segment, and revenue for the unit fell 5% last quarter. However, the company is expecting units to drop 10% in 2027 after a 12% decline this year, which will also lead to a large inventory correction that will significantly impact the next two quarters.
Meanwhile, Intel’s foundry business continues to produce large losses, including a $1.9 billion operating loss in Q3. The company is struggling to find external customers, in part due to technology and in part due to conflicts of interest, and if the data center build-out shifts overseas, this will likely sting it even more, given its strong domestic footprint.
Intel is the market leader in server CPUs, and like AMD, it’s been seeing strong growth in this area. However, the company has been consistently losing shares to AMD and custom CPUs. This is only expected to continue in the years ahead, especially as the company has no turnkey solution like Nvidia and AMD.
As such, I think the stock could continue to underperform over the next three years.
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Geoffrey Seiler has positions in Advanced Micro Devices and Meta Platforms. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool has a disclosure policy.
AMD vs. Intel: Which Is the Better AI Chip Stock to Own for the Next 3 Years Following the Semiconductor Crash? was originally published by The Motley Fool