With Microsoft’s announcement, is it time to abandon Nvidia’s stockpile in favor of high-end micro devices?

Microsoft recently announced that it will offer its cloud customers the opportunity to use the company’s MI300X artificial intelligence chips Advanced Micro Devices (NASDAQ:AMD). Alternatively, Microsoft will offer MI300X chip clusters through its Azure cloud computing service Nvidia‘S (NASDAQ: NVDA) H100 graphics processing units (GPUs).

In light of this announcement, is it time to ditch Nvidia stock for AMD?

The simple answer is: no. Expanding on this answer, this may be a good time to buy both the stock and the beneficiary.

Why Microsoft started offering AMD chips

Microsoft doesn’t offer cloud customers an option for AMD GPUs that will beat Nvidia’s GPUs, which have become the industry standard for supporting AI applications in the data center. The problem is that Nvidia’s chips are so popular that it’s hard for companies to get their hands on them. This isn’t a bad problem.

Both Nvidia and AMD are struggling to keep up with demand for their GPUs. Taiwanese semiconductor production (NYSE:TSM), the world’s largest semiconductor maker, said its advanced packaging capacity is fully booked for both the remainder of this year and next. This is believed to be due to demand for GPUs from both Nvidia and AMD, which are among the company’s top 10 customers.

TSCM is aggressively expanding its manufacturing capacity to meet demand for artificial intelligence and other high-performance computing (HPC) chips. The company is currently planning to build a third manufacturing facility (factory) in Arizona, after the first plant in the state has just started producing wafers. The company has just completed construction of its first specialized technology factory in Japan and announced that its second factory in the country will be completed by the end of 2027. It is also building a factory in Germany for automotive and industrial applications, which is scheduled to begin construction at the end of this year.

TSMC also wants to fully develop 2-nanometer chip technology. In the semiconductor industry, as technology moves to smaller nodes (semiconductor sizes), more chips can fit on a wafer, increasing production efficiency and reducing costs.

Until this technology and its development are established, it appears that the GPU market will remain limited.

It’s time to buy Nvidia, AMD and TSMC

Instead of dumping Nvidia, this could be a good time for investors to buy shares of both Nvidia and AMD, as well as TSMC. The demand for high-performance computer chips and graphics processors is enormous, and the industry is currently struggling to meet this demand.

Nvidia remains the clear leader and its development is nothing short of spectacular. The company long ago became the standard in the GPU industry before the advent of artificial intelligence thanks to its CUDA software platform, which allowed GPUs to be directly programmed. At this point, the company can probably sell as many tokens as its foundry partners can produce. Today, most semiconductor companies do not have their own manufacturing facilities but use contract manufacturers such as TSCM.

The story continues

Meanwhile, AMD is a welcome beneficiary of a very tight GPU market. With first-quarter results, the company just increased expected full-year GPU data center revenue from $3.5 billion to $4.0 billion. And since Nvidia GPUs are hard to come by, AMD has a chance to enter this market and become a viable number two player. Companies generally don’t like to be overly dependent on a single supplier, so current market dynamics could give AMD a long-term boost if its chips are well received.

Meanwhile, TSCM is one of the main beneficiaries of demand for GPUs and chips as companies rush to source these chips for AI applications. By adding more factories and moving to 2-nanometer technology, TSCM will be able to benefit from the development of AI chips. Other companies that join this initiative will also benefit. This has been reported e.g Arm positions AND Softbank they tried to design an AI chip while companies like it Amazon they also entered the AI ​​chip industry. Apple It has since been reported that executives met with TSMC to reserve 2-nanometer production to help catch up in the field of artificial intelligence. This is all to TSMC’s advantage.

Looking at valuations, TSMC is the cheapest company with a price-to-earnings ratio of around 24 times. It is even cheaper on an enterprise value/EBITDA basis and is traded almost thirteen times. This measure takes into account net debt and includes non-cash expenses.

Meanwhile, Nvidia has a price-to-earnings ratio of 37 and 32 on an EV/EBITDA basis. Given the growth, this is a cheap valuation.

AMD is the most valuable company in the group, with a price-to-earnings ratio of more than 47 and an EV/EBITDA multiple of more than 50. However, the company has not yet seen the potential inflection point for AI chips that the two companies will have. so it still has potential.

In terms of preference, my top choice right now would be Nvidia, closely followed by TSMC and then AMD. However, all three companies have great long-term potential.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Geoffrey Seiler has no position in any of the companies mentioned. The Motley Fool holds positions on and recommends Advanced Micro Devices, Amazon, Apple, Microsoft, Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long calls to Microsoft for $395 in January 2026 and short calls to Microsoft for $405 in January 2026. The Motley Fool has a disclosure policy.

With Microsoft’s announcement, is it time to abandon Nvidia’s stockpile in favor of high-end micro devices? was originally published by The Motley Fool