AI Stock Dominator: AMD vs. Microsoft?

Published Date: 08/07/2024

The artificial intelligence (AI) market is booming, and tech giants Advanced Micro Devices (AMD) and Microsoft are vying for dominance. But which company is the better investment?

The AI market has been on fire, driving the Nasdaq Composite index up 21% year to date. The launch of OpenAI's ChatGPT has brought renewed interest in AI, and companies like AMD and Microsoft are reaping the benefits. With the AI market projected to hit $2 trillion in spending by 2030, these tech giants are poised for significant growth.

AMD has been playing catch-up in the AI chip market, dominated by Nvidia. However, the company has made promising progress, attracting customers like Microsoft and Meta Platforms. AMD's rapid growth and shifting to an annual chip release schedule have helped the company compete with Nvidia.

Microsoft, on the other hand, has been an early investor in AI, partnering with OpenAI in 2019. The company has invested about $13 billion in the start-up, making it OpenAI's biggest backer. This partnership has given Microsoft a head start over competitors Amazon and Alphabet, allowing it to enhance multiple areas of its business.

Microsoft's AI efforts have shown signs of paying off, with revenue increasing by 17% year over year to $62 billion in its third quarter of 2024. The company's dominance in tech and vast financial resources indicate it's nowhere near hitting its ceiling.

So, which company is the better AI stock? AMD's long-term position in AI is more uncertain than Microsoft's, and the chipmaker has significantly less cash reserves. Moreover, AMD's stock offers significantly less value than Microsoft's, with a higher price-to-earnings ratio and price-to-free cash flow.

Microsoft's considerably higher free cash flow indicates it's better equipped to continue expanding in AI and keep up with its rivals. As a result, Microsoft is the better AI stock and an attractive long-term buy right now.

FAQs:

Q: What is the projected value of the AI market by 2030?

A: $2 trillion

Q: Who is the biggest investor in OpenAI?

A: Microsoft

Q: What is the name of AMD's AI accelerator?

A: MI300X

Q: What is the name of the chatbot developed by OpenAI?

A: ChatGPT

Q: Which company has dominated the AI chip market?

A: Nvidia

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