Forget Intel: 2 Better Artificial Intelligence (AI) Stocks to Buy After a Sell-Off

Intel (INTC 0.87%) has been one of the biggest victims of a recent tech sell-off, with its share price down 42% in the past month. Recession fears have cast doubt among tech investors, sending shares of dozens of companies tumbling. Market uncertainty combined with weaker-than-expected quarterly earnings from Intel triggered a sharp drop in its stock.

Typically, such a dramatic selloff would produce a bargain stock price. However, the chart below shows that Intel’s price-to-earnings (P/E) ratio remains considerably higher than its two biggest chip competitors, Nvidia (NVDA 1.40%) and Advanced microdevices (AMD 0.81%).

Data by YCharts. PE ratio = price-earnings ratio.

This chart shows that Intel not only has the largest forward P/E of these companies, but its figure for the metric is also well above its 2022 average. Meanwhile, AMD and Nvidia’s P/E are relatively close of their averages, making them a bargain compared to Intel.

Moreover, recent earnings suggest that Intel’s position in the burgeoning artificial intelligence (AI) market is less secure than its rivals. In the second quarter of 2024, the company missed estimates for earnings per share by $0.08 and revenue by $150 million. Recent challenges have caused Intel’s quarterly free cash flow to drop nearly 5,000% over the past year to a negative $3 billion.

Meanwhile, Nvidia and AMD have more established roles in AI and have offered promising financial growth thanks to the expanding industry. So forget Intel and consider these better AI stocks after a sell-off.

1. Nvidia

Shares of Nvidia have fallen about 10% over the past 30 days amid a tech pullback. The worst declines saw the share price fall by 25% between July 10 and August 5. However, a recovery appears to be underway, suggesting that investing sooner rather than later may be best.

The company’s stock price has risen 18% in the past week alone, adding more than $420 billion in market value. The increase aligns with Nvidia’s recent growth trajectory and its strong role in AI.

Nvidia accounts for about 70% to 95% of AI accelerators due to the success of its graphics processing units (GPUs). These chips are crucial for building and running AI models because they are able to complete multiple tasks simultaneously. As a result, GPUs can handle the heavy workloads involved in developing large language models such as OpenAI’s ChatGPT and other AI networks.

The company’s strong role in AI has made it the go-to chip supplier for countless organizations. Some of its biggest clients include tech giants such as Amazon Web Services (AWS), Meta platforms, Microsoftand Alphabet. Meanwhile, the company provides its chips for consumer products such as adzeits self-driving technology and Nintendohis Switch console.

In addition, Nvidia recently partnered with California in an initiative supported by Governor Gavin Newsom to train its residents on AI technology. CEO Jensen Huang said the collaboration will promote job creation and “train 100,000 students, teachers, developers and data scientists to leverage this technology.”

Nvidia will report its fiscal 2025 Q2 earnings on August 28. Quarterly revenue and operating income grew 44% and 63%, respectively, over the past 12 months, with the company consistently beating expectations. The upcoming earnings release will likely follow recent trends, making Nvidia stock a compelling buy after a selloff and a better option than Intel.

2. Advanced microdevices

After a market slump, AMD’s stock price has fallen 22% in the past month. However, consistent financial growth and an expanding position in AI make its stock too good to ignore.

The chipmaker reported its Q2 2024 earnings late last month, with revenue rising 9% year over year and beating Wall Street forecasts by $120 million. AMD scored a massive win in the AI-focused data center segment, which saw revenue grow by a record 115% year-over-year and operating income grew by more than 400%.

AMD made promising progress in AI in Q2 2024 as increased sales of AI GPUs led to impressive financial growth. Meanwhile, the quarter also saw the company achieve its highest server central processing unit (CPU) market share in decades. Mercury Research shows that AMD’s server share has increased by 5.6 points from 2023, reaching a share of 24.1%.

The increase in server processors shows that the company is gaining Intel’s position in the market. Intel has dominated processors for years, with AMD gradually eroding market share. However, AMD managed to make the business much more profitable. As Tom’s Hardware pointed out, “While Intel earned $3.0 billion selling 75.9 percent of data center processors (in terms of units), AMD earned $2.8 billion selling 24.1 % of server processors (in terms of units). The difference is staggering and only strengthens the bullish case for AMD stock.

AMD’s quarterly free cash flow rose 81% year-to-date to $439 million, while Intel’s fell to a negative $3 billion. The numbers suggest that AMD is more financially stable, with more cash reserves to continue expanding its business. Along with a better rated stock, AMD is a no brainer AI stock right now.