Better Artificial Intelligence (AI) Stock: Advanced Micro Devices vs. Micron Technology

The demand for artificial intelligence (AI) chips has been increasing at a nice pace in the past few years

Major cloud service viders (CSPs), hyperscalers, and governments have been spending a lot of money on shoring up their cloud infrastructure so that they can run AI workloads

As a result, s of both these chip designers have clocked impressive gains in the past three months

But if you had to put your money into just one of these AI semiconductor stocks right now, which one should it be

Image source: Getty Images

The case for Advanced Micro Devices AMD designs chips that go into personal computers (PCs), servers, and gaming consoles, and for other applications such as robotics, automotive, and industrial automation

AI has created impressive demand for the company's chips in these areas, leading to healthy growth in its top and bottom lines

AMD's data center revenue was up by 57% from the year-ago period, while the PC reported a 68% increase

In the data center, AMD sells both central cessing units (CPUs) and graphics cessing units (GPUs) that are deployed in AI servers

The demand for both these ducts is strong, which is evident from the terrific growth the company recorded in Q1

AMD is pushing the envelope on the duct development front with new chips that are expected to pack in a serious performance upgrade and may even help it take market away from Nvidia

All this indicates that AMD is on track to take advantage of the growing adoption of AI chips in multiple applications, and that's expected to lead to an acceleration in its bottom-line growth

As such, this semiconductor company is ly to remain a top AI stock in the future as well

The case for Micron nology Micron nology manufactures and sells memory chips that are used for both computing and storage purposes, and the s of AMD and Nvidia are its customers

In fact, just AMD, Micron's memory chips are used in AI accelerators such as GPUs and custom cessors, PCs, and the smartphone and automotive end

Micron has been witnessing outstanding demand for a type of chip known as high-bandwidth memory (HBM), which is known for its ability to transmit huge amounts of data at high speeds

This is the reason why HBM is being deployed in AI accelerators, and the demand for this memory type is so strong that the s of Micron have already sold out their capacity for this year

Micron's memory chips are used in PCs and smartphones as well

Apart from the growth in unit volumes that AI-enabled PCs and smartphones are expected to create going forward, the amount of memory going into these devices is also expected to increase

CEO Sanjay Mehrotra remarked on the company's earnings conference call: AI adoption remains a key driver of DRAM content growth for smartphones, and we expect more smartphone launches featuring 12 gigabytes or more compared to eight gigabytes of capacity in the average smartphone today

Similarly, AI-enabled PCs are expected to sport at least 16GB of DRAM to run AI workloads, up by a third when compared to the average DRAM content in PCs last year

So, just AMD, Micron is on its way to capitalizing on multiple AI-focused end

However, it is growing at a much faster pace than AMD because of the tight memory supply created by AI, which is leading to a nice increase in memory prices

Analysts are forecasting a 6x jump in Micron's earnings in the current fiscal year, and they have raised their earnings expectations for the next couple of years as well

MU EPS Estimates for Current Fiscal Year data by YCharts

So, Micron stock seems poised to sustain its impressive growth momentum, thanks to the AI-fueled demand for HBM

The verdict Both AMD and Micron are growing at solid rates, with the latter clocking a much faster pace thanks to the favorable demand-supply dynamics in the memory industry

What's more, Micron is trading at a significantly cheaper valuation compared to AMD, despite its substantially stronger growth

AMD PE Ratio data by YCharts

Investors looking for a mix of value and growth can pick Micron over AMD, considering the former's attractive valuation and the phenomenal earnings growth that it can der

However, one can't go wrong with AMD either

The company should be able to justify its valuation in the long run, considering its ability to clock stronger earnings growth

Harsh Chauhan has no position in any of the stocks mentioned

The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia

The Motley Fool has a disclosure policy.