AMD or Intel: Analysts Pick the Superior AI Chip Stock to Buy After Recent Blockbuster Partnerships

Advanced Micro Devices (NASDAQ:AMD) and Intel (NASDAQ:INTC) are inextricably linked to each other, and an interesting dynamic has developed between the two chipmakers over the past decade. Once the clear leader in the CPU space, Intel has lost ground over the last few years, hampered by strategic mistakes, mismanagement, and delays to its product roadmap. That ground has been ceded to AMD, which, under the astute leadership of Lisa Su, transitioned from a company on the brink of bankruptcy to become a chip colossus, offering excellent products and steadily eating away at Intel’s dominance.

And more recently, both have seen another rival head off into the sunset, cradling the AI chip trophy. The two companies have watched Nvidia become the undisputed AI chip king, and trail far behind both in market share and prestige.

But there’s another common thread. Both AMD and Intel recently made headlines with moves that might be considered game-changers, with shares of both chipmakers surging on news that could position them more favorably in the AI game.

So, we’ve opened the TipRanks database to find out which company is now getting the backing of the Street’s analysts and is considered the superior buy following these mega announcements. Here are the details. 

Advanced Micro Devices

When the AI trend kicked off around three years ago, it quickly became evident that, as the AI chip supplier of choice, Nvidia was top dog – its success in the game setting it on course to become the world’s most valuable company. But almost immediately, AMD was seen as possibly the one company that could challenge its dominance. After all, as noted above, it had done so before, making itself an ongoing pain in the backside and taking share from the far more illustrious Intel in the CPU world.

But it soon became clear AMD lacks the full-stack abilities of Nvidia to offer a sustained challenge to its dominance, and as Nvidia soared to the top of the market cap pile, AMD languished far behind. However, underestimating the Lisa Su-led firm has never been a good idea, and AMD got to work on closing the gap. Now, with the company slated to release its next-gen MI400 series AI accelerators next year – boasting significant improvements in compute performance – the company is ready to offer a proper challenge to Nvidia.

In fact, AMD’s standing became a lot firmer on Monday. News that the company had signed a mega deal with ChatGPT maker OpenAI sent the shares stratospheric and signifies a huge shift in sentiment. The pair has entered a multibillion-dollar chip agreement that includes an option for OpenAI to purchase up to 10% of AMD and represents a strong endorsement of AMD’s AI hardware and software capabilities.

The significance of this deal cannot be understated, says Melius Research analyst Ben Reitzes.

“We thought a big OpenAI deal was coming at some point for AMD – but this is about 5x better than we thought it would be,” the analyst said. “OpenAI now fully onboard with AMD for at least 5 years to add 6GW of capacity in a creative structure with warrants that will help both AMD shareholders and help OpenAI raise billions. For AMD, the structure motivates OpenAI to really hustle to get a hold of power and deploy Instinct GPUs before the warrants expire in 2030. As an AMD shareholder, OpenAI should also be motivated to allocate resources to help AMD drive continuous improvements in software, networking and other perceived weaknesses… Hats off to AMD.”

As such, Reitzes assigns AMD shares a Buy rating, while raising his price target from $200 to a Street-high of $300. Should the figure be met, investors will be sitting on returns of ~42% a year from now. (To watch Reitzes’ track record, click here)

23 other analysts join Reitzes in the AMD bull camp, and with an additional 12 Holds, the stock claims a Moderate Buy consensus rating. The $228.91 average price target implies the shares could climb another 8% from here. (See AMD stock forecast)

Intel

With AI hype having gone through the roof, there are murmurings of a huge AI bubble forming, set to pop just like it did following the dot-com boom at the start of the century. That was when Intel ruled the roost, briefly becoming the world’s most valuable company.  

At the time, it stood as one of the leading players in the personal computing market, having pioneered microprocessors and solidified its status as a key player in the tech revolution.

But that is no longer the case. Intel has been unable to keep up with the other tech giants and is now seen as something of a fallen chip giant. The reasons behind its downfall are various and include a string of major missed opportunities, such as failing to supply chips for the first iPhone in 2007 along with delays in advancing its process technology, which allowed competitors like AMD to win customers with more powerful and efficient chips, and a series of management missteps that slowed the growth of a company once seen as a symbol of Silicon Valley’s ascent.

A downward spiral for the stock followed, with Intel failing to play a meaningful part in the rise of AI. That is, until recently, and a major announcement detailing a collaboration with Nvidia that sent the shares on a big run. Last month, the two chipmakers disclosed an agreement under which Intel will manufacture CPUs for Nvidia’s AI platforms, as well as processors that incorporate Nvidia graphics for PCs. As part of the deal, Nvidia will also invest $5 billion in Intel stock.

Is this the game-changer Intel investors have been longing for? Not according to Citi analyst Christopher Danely, who just doesn’t think the deal is that significant.

“We don’t believe the CPU for NVDA AI platforms is meaningful as this seems aimed at Nvidia’s Grace CPU product, and we believe the market opportunity is roughly $1-$2 billion for Intel or 3% of C26E sales,” the analyst explained. “We expect minimal improvement for Intel as better graphics won’t make Intel’s CPU better than AMD’s given the processor is the main performance driver… We are Sell rated on Intel shares due to Intel’s expensive valuation and our belief that the stock is pricing in success in its leading-edge foundry business, which we believe has minimal chance to succeed.”

That Sell rating is backed by a $29 price target that points toward a one-year downside of 21%. (To watch Danely’s track record, click here)

Amongst Danely’s colleagues, 3 other analysts are bears too, yet with an additional 27 Holds and 2 Buys, the analyst consensus rates the stock a Hold (i.e., Neutral). Going by the $26.38 average price target, a year from now, shares will be changing hands for a 29% discount. (See INTC stock forecast)

All in all, analysts clearly view AMD as the superior stock to buy. While Intel’s collaboration with Nvidia drew attention, most experts see limited upside. In contrast, AMD’s multibillion-dollar OpenAI deal is being hailed as transformative – a strong endorsement of its AI capabilities that could reshape its competitive position.

To find good ideas for AI stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.