Riding the AI Wave: Why AMD Stock Deserves a Spot in Your Portfolio

Stocks to buy

If you want portfolio exposure to the future of artificial intelligence (AI) compatible hardware, then Nvidia (NASDAQ:NVDA) stock is all you need. Right? Not necessarily, as Advanced Micro Devices (NASDAQ:AMD), commonly known as just AMD, is also a key competitor in the AI arms race. Hence, it’s entirely reasonable to own equal dollar amounts of NVDA stock and AMD stock.

I fully expect the U.S.-China chip battle to resolve at some point, hopefully this year, and there’s room for more than one winner. Nvidia is the obvious darling of the markets, but investors shouldn’t sleep on AMD now. Indeed, AMD could catch up to Nvidia in the AI chip race and you’ll want to position yourself for maximum gains ahead of time.

Headline-Grabbing Acquisition Could Catalyze AMD Stock

Make no mistake about it: AMD is taking direct aim at Nvidia’s AI chip market share in 2023. Regarding this, the financial press is abuzz as AMD recently agreed to acquire open-source AI software specialist Nod.ai.

I really like InvestorPlace contributor Chris MacDonald’s concise summary of the motivation behind this buyout. As MacDonald put it, “Acquiring Nod.ai is part of AMD’s strategy, and it smoothens the release of AI models optimized for AMD chips.”

AMD stockholders should consider this to be the most impactful company-specific news in a long time. The only thing that bothers me about it is that AMD didn’t disclose the terms of the deal in the press release.

So, it will be more difficult to assess whether AMD’s buyout of Nod.ai will offer a good return on investment (ROI). Nevertheless, I’m looking forward to seeing how Nod.ai can enhance AMD’s AI-compatible processors and other components in the coming quarters.

Awesome Names, Awesome Products

I’ll admit it. I’m a fan of products with awesome names. Of course, it’s more important to have awesome products than good names. Still, AMD’s Alienware and Threadripper product lines are bound to capture people’s attention.

In any case, these products are ideal for AI workloads. First, there’s AMD’s Alienware m18 laptop lineup, which features the new AMD Radeon graphics processing units (GPUs). These Alienware laptops feature new AI accelerators that are specifically “optimized for the latest AI workloads.”

Then, there are the AMD Ryzen Threadripper 7000 and PRO 7000 WX-Series Processors. These two Threadripper processor series are made for desktops and workstations and will be available for workstations made by Dell Technologies (NYSE:DELL) and other manufacturers.

Is there an AI angle here? Of course, there is. Meghana Patwardhan, vice president, Commercial Client Products, Dell Technologies, emphasized the synergy of AMD’s Threadripper processors and Dell’s computers in facilitating AI workloads:

“Working closely with AMD, we’re expanding our portfolio of AI-ready workstations with the addition of the Precision 7875 Tower, equipped with the utmost scalability and power for demanding applications.”

Win the AI Chip Wars With NVDA Stock and AMD Stock

It’s going to be hard to pick a winner in the AI chip wars. Nvidia is the obvious choice, but AMD has its own AI-compatible products.

Maybe, you don’t have to pick just one winner. Why not invest in both NVDA stock and AMD stock? That way, you can bet on two different horses to win the AI horse race.

Alternatively, you can buy an index fund that tracks the Nasdaq. This strategy will give your portfolio some exposure to the growth of Nvidia and AMD. But no matter how you approach it, I definitely recommend investing in AMD for the long haul.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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