Forget about these all-powerful AI stocks and consider buying its weaker rival instead in 2024.

Advanced Micro Devices(NASDAQ:AMD) Since the beginning of 2023, many investors have been optimistic, with the company’s share price rising by more than 115%. The increase in the company’s value has coincided with a sharp increase in interest in artificial intelligence (AI).

AMD’s rival in chipset Nvidia initially caught the eye because its graphics processing units (GPUs) had become the hardware of choice for many AI developers. But Wall Street quickly turned its attention to AMD, with its No. 2 share of the GPU market and partnerships with many of the most recognizable brands in technology.

AMD has attracted investors over the past year with its competitive AI GPUs, including the MI300X AI accelerator and the MI325X, which is set to launch in the fourth quarter of 2024. The company’s hardware has caught the attention of many tech companies and added Alphabet, Microsoft, OracleAND Amazon to its list of integrated circuit clients, each of which is working to strengthen its position in the field of artificial intelligence.

However, while AMD has significant long-term potential, its financials haven’t yet kept up with its skyrocketing stock price. The chipmaker reported revenue growth of 80% in its AI-focused data center segment in the first quarter, but was held back by significant declines in other segments. As a result, total revenue for the period rose just 2% year over year.

The discrepancy between AMD’s stock growth and its earnings has pushed its price-to-earnings (P/E) ratio to a solid 207. As such, it’s worth taking a look at other stocks in the integrated circuit industry now that offer more value while also having similar growth potential, if not more.

So forget about those all-powerful AI stocks and consider buying shares of their underdog rival in 2024 instead.

An increasingly diverse position in the field of artificial intelligence

Intel‘S (NASDAQ:INTC) The stock has been battered in recent years, falling 41% since 2021 while AMD is up 51%. However, investor sentiment seems to have changed over the past month, as Intel shares are up 2% while AMD shares are down more than 10%.

After a decade of setbacks for Intel, including losing market share in integrated circuits and ending a lucrative partnership with Appleinvestors seem to be gradually embracing the return of this outsider. In fact, the company has welcomed new customers to its Gaudi AI lineup this year, including Bosch, IBMand Seekr.

Intel began overhauling its business last year to prioritize AI and manufacturing. That shift saw the company unveil a series of AI-enabled chips to compete with hardware from AMD and Nvidia, as well as begin construction on the first of at least four chip factories it will build in the U.S.

In June, Intel unveiled its Xeon 6 processors, designed to handle heavy data center workloads, and its Gaudi 3 processor, capable of training and deploying AI models. The company also announced its Lunar Lake chips, designed specifically for AI-enabled computers. Each of these products takes Intel into a different AI sector, diversifying its position in the industry.

In addition to chip design, Intel is potentially a more reliable option than AMD due to its growing focus on the foundry market. Rising tensions between the U.S. and China have caused shares of many chipmakers to fall over the past week, as most of these companies rely heavily on Semiconductor Manufacturing in Taiwanservices. However, Intel’s share price rose on the back of a plan to expand domestic foundry capacity with upcoming plants.

Intel investors should keep a long-term perspective, as it will take time to get the company’s chip factories up and running. But recent moves show the company could have a very lucrative future in AI as it becomes a leading manufacturer and attracts companies to its projects. Intel says the foundry expansion will save it “in excess of $8 billion to $10 billion by 2025,” and executives are forecasting the company will achieve “non-GAAP gross margins of 60%” and operating margins of 40%.

Meanwhile, Intel Foundry is already making progress. It reported operating income of $625 million in the first quarter of 2024, significantly improving on the $880 million loss it reported in the same period a year earlier.

The latest moves could position Intel as an AI chipmaker in the coming years. Alongside its new line of AI chip designs, Intel is steadily carving out a promising position in AI.

Intel stock is an opportunity you simply can’t miss

Investors’ cautious approach to Intel stock over the past year compared to other AI stocks has kept the stock price attractive.

Data by YCharts.

This table shows that AMD stock is trading at about 207 times earnings, which is by far the highest among some of the most well-known names in chip and AI. Intel’s P/E ratio, meanwhile, is the lowest at 33, indicating that its stock offers significantly more value than AMD and many other companies, signaling a buying opportunity.

Beyond Intel’s more diverse AI positioning, the company’s stock is a no-brainer. AMD may seem all-powerful, with its larger GPU market share and partnerships with notable companies, but Intel’s recovery could be a chance to get in early and capitalize on its rebirth. As a result, it’s worth taking a chance on this outsider that could soar over the next decade.

Is it worth investing $1,000 in Intel now?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, CEO of Alphabet, is a member of The Motley Fool’s board of directors. Dani Cook has no holdings in any of the stocks mentioned. The Motley Fool owns shares in and recommends ASML, Advanced Micro Devices, Alphabet, Amazon, Apple, Microsoft, Nvidia, Oracle, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and International Business Machines and recommends the following options: long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short August 2024 $35 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.