AMD vs. Micron: Top AI Stock?
Source: nasdaq.com
AMD and Micron: AI Semiconductor Stocks
Shares of AMD and Micron Technology have increased impressively in the last three months. Both companies stand to gain from similar markets, though one is expanding at a greater rate. It may be helpful to evaluate their valuations to determine which semiconductor stock is worth purchasing now.
The demand for AI chips has grown in recent years. Major cloud service providers, hyperscalers, and governments are investing in their cloud infrastructure to handle AI workloads. This has boosted the businesses of Advanced Micro Devices and Micron Technology in recent quarters, leading to share gains. AMD's stock has risen 32%, while Micron's is up 36% over the same period.
AMD's AI Chip Growth
AMD designs chips for PCs, servers, gaming consoles, robotics, automotive, and industrial automation. AI has significantly increased demand for AMD's chips, boosting its financial performance. In the first quarter of 2025, AMD's revenue increased by 36% year-over-year to $7.4 billion, with non-GAAP earnings per share rising by 55% to $0.96. This growth was driven by the data center and PC markets, which made up 81% of its revenue. Data center revenue increased by 57%, and the PC business increased by 68%.
AMD sells CPUs and GPUs used in AI servers within the data center market. Demand for these products is strong. AMD estimates that the AI accelerator chip market in data centers could reach $500 billion in annual revenue by 2028. AMD's data center chip sales generated $12.6 billion in revenue last year, nearly double the 2023 figure. The company is developing new chips to improve performance and potentially gain market share. AMD is also making PC CPU market share gains within the AI PC market, which is projected to see a 42% annual growth rate in shipments through 2028.
AMD is positioned to capitalize on the increasing use of AI chips, which should accelerate its earnings growth. Projections estimate a 17% rise in AMD's earnings this year, followed by a 45% increase in 2026. Consequently, this semiconductor company is positioned to remain a leading AI stock.
Micron's AI Chip Growth
Micron Technology produces and sells memory chips for computing and storage, serving customers like AMD and Nvidia. Micron's memory chips are used in AI accelerators such as GPUs and custom processors, PCs, and the smartphone and automotive markets. There has been strong demand for high-bandwidth memory (HBM) chips, which transmit large amounts of data quickly. Because of this speed, HBM is used in AI accelerators, and demand is so high that Micron has already sold out its capacity for the year.
Micron is increasing its HBM production capacity, with capital expenditures rising from $8.1 billion to $14 billion in the current fiscal year. The company's focus on HBM production is strategic, as this market is expected to reach $100 billion in annual revenue by 2030, compared to $35 billion this year. Micron's memory chips are also used in PCs and smartphones. In addition to the increased unit volumes from AI-enabled PCs and smartphones, the amount of memory in these devices is also expected to increase. AI adoption drives DRAM content growth for smartphones, with more smartphones featuring 12GB or more, compared to 8GB in the average smartphone today. AI-enabled PCs are expected to have at least 16GB of DRAM to handle AI workloads, up a third from last year.
Micron is also capitalizing on multiple AI-focused markets, growing faster than AMD due to tight memory supply and rising prices. Micron's adjusted earnings more than tripled in the previous quarter to $1.91 per share, with a 37% revenue increase. Analysts predict a 6x increase in Micron's earnings this fiscal year and have raised their earnings expectations for the coming years. Micron stock is expected to maintain its growth due to AI-driven demand for HBM.
Valuation and Investment Considerations
Both AMD and Micron are growing, but Micron is growing at a faster rate due to supply and demand in the memory industry. Micron's valuation is cheaper than AMD's, despite its growth. Investors seeking both value and growth may prefer Micron, given its valuation and growth potential. However, AMD is also a viable option and may justify its valuation in the long term, based on its ability to produce stronger earnings growth.