AMD vs. Arm vs. Intel: The Best Stock to Play the Rise of Agentic AI
With the rise of agentic AI, the number of central processing units (CPUs) used within AI data centers is set to explode. While graphics processing units (GPUs) are good at providing raw computing power, CPUs act more like the brains of the operation and can handle the sequential reasoning that lets AI agents stop and think before they act. As a result, the GPU-to-CPU ratio is expected to go from 8-to-1 for training, down to 4-to-1 for inference, and to 1-to-1 for AI agents.
With Nvidia predicting this could become a $200 billion market in the next few years, Advanced Micro Devices (NASDAQ: AMD), Arm Holdings (NASDAQ: ARM), and Intel (NASDAQ: INTC) are all set to benefit. Let’s see which one of those three looks like the best agentic AI stock to buy.
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AMD
AMD is a leader in the data center CPU space, having consistently taken share away from Intel over the past few years. The company has strong technology and has developed high-core CPUs designed specifically for agentic AI. Cores act like individual workstations, and packing more cores into a CPU is like giving the chip a large workforce to help power autonomous AI agents. Its new Venice architecture, set to debut soon, utilizes up to 256 cores, making it ideal for agentic AI.
In addition to its agentic AI opportunity with its CPUs, AMD is also benefiting from the surging inference market with its GPUs. Its acquisition of memory optimization company MEXT, whose chiplet design allows it to be packaged with more memory, positions AMD well in the inference market, and it already has two massive deals in place with OpenAI and Meta Platforms.
Intel
Intel has been one of the hottest stocks in the market over the past year, up around 323%. This largely stems from its data center CPU opportunity. While the company has arguably ceded its technological leadership in the space, data center CPU demand is so high that it has been a big boost to the company. And with supply generally tight, it has been able to increase CPU prices, which should help boost both its revenue and gross margin.
That said, Intel’s larger computer chip business has been somewhat stagnant, and higher component prices (not just CPUs but also memory) could eventually hurt PC sales. Its foundry business also continues to struggle with losses. Intel was once a cheap stock based on the value of its physical assets, but that is no longer the case, given its huge surge over the past year.
Arm Holdings
Arm shocked investors when it announced it would forgo its typical licensing and subscription model and begin making its own CPUs, given the market growth it saw. ARM uses a different architecture than the x86 standard used by Intel and AMD. Its architecture has become the standard in smartphones and is the technology behind custom data center chips from companies like Nvidia, Amazon, and Alphabet.
At the time of its announcement, Arm saw the data center CPU market rising to $100 billion over the next five years and believed it could take a 15% market share. That would take its 2031 revenue to $25 billion, with $15 billion coming from CPUs.
However, the company’s core smartphone business could face pressure, as high memory costs are expected to push up smartphone prices, potentially slowing demand. Meanwhile, securing manufacturing capacity could put a lid on its CPU opportunity in the near term, while it now risks competing against its own customers.
The verdict
In my view, the clear winner is AMD. It doesn’t face the same magnitude of headwinds in parts of its business as Intel and Arm do, while it also has a second big tailwind with its GPUs and inference. It is also the current leader in the data center CPU market and, therefore, should be one of the biggest beneficiaries of this market’s rise. As such, it is the agentic AI semiconductor stock that I’d be buying.
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Geoffrey Seiler has positions in Advanced Micro Devices, Alphabet, Amazon, and Meta Platforms. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Arm Holdings, Intel, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.
AMD vs. Arm vs. Intel: The Best Stock to Play the Rise of Agentic AI was originally published by The Motley Fool
