Microsoft vs. Intel: Comparing AI Stocks for 2024
Artificial intelligence (AI) has become a captivating field in the business world, with the market reaching nearly $200 billion in 2023 and projected to grow at a compound annual growth rate of 37% by 2030. It is no surprise that tech companies are prioritizing AI development, offering exciting investment opportunities in this high-growth sector. Two prominent options in the AI market are Microsoft and Intel, each with their strengths and potential for long-term growth.
Microsoft has emerged as a strong player in AI, thanks to its heavy investment in the market. The company acquired a 49% stake in OpenAI, the developer of ChatGPT, positioning itself as a formidable competitor to Amazon and Alphabet. Microsoft has integrated ChatGPT technology across its product lineup, incorporating AI upgrades into Bing, Azure, and its Office platforms. The company’s commitment to AI is paying off, as evidenced by its strong quarterly earnings. In the first quarter of 2024, Microsoft surpassed analysts’ estimates with a 13% year-over-year revenue growth, driven by its cloud and productivity segments.
On the other hand, Intel is making promising inroads in the chip sector, a critical component for AI technology. While Nvidia currently dominates the AI graphics processing unit (GPU) market, Intel is gearing up to challenge its dominance. Recently, Intel unveiled its new AI GPUs called Gaudi3, directly competing with Nvidia’s offerings. Additionally, Intel introduced new Core Ultra processors and Xeon server chips, both equipped with neural-processing units designed to enhance AI program performance. While Intel has faced challenges in recent years, including a downturn in PC sales, its earnings are on an upward trajectory. Despite a 14% year-over-year dip in revenue in Q3 2023, Intel’s operating income rose by more than 43% to $2 billion.
When comparing Microsoft and Intel as AI stocks for 2024, several factors come into play. Microsoft has a higher forward price-to-earnings ratio (P/E) of 36 compared to Intel’s 25, indicating that Microsoft’s stock is more expensive. On the other hand, Intel offers a lower-priced stock, which suggests greater value. Moreover, earnings-per-share (EPS) estimates for the next two fiscal years reveal that Intel may have more stock-growth potential. While Microsoft’s EPS could reach $15 per share, Intel’s is projected to achieve nearly $3 per share. Factoring in the forward P/E for each company, these estimates translate to stock prices of $540 for Microsoft and $68 for Intel. With these projections, Intel’s stock could potentially experience a 42% rise over the next two fiscal years, surpassing Microsoft’s 36% growth.
In summary, both Microsoft and Intel have significant potential in the AI market. Microsoft’s strong foothold in the software side of AI, along with its partnership with OpenAI, positions it as a fierce competitor. On the other hand, Intel’s advancements in AI chips present an opportunity for substantial growth. While Microsoft is currently the more expensive option, Intel’s lower-priced stock, higher growth potential, and prominent role in AI make it an attractive investment for 2024.
Sources:
– The Motley Fool
– Grand View Research
