The Motley Foolยท2025-07-05 11:15Core Viewpoint - The demand for AI chips is rapidly increasing, driven by investments from cloud service providers, hyperscalers, and governments in cloud infrastructure to support AI workloads [1] Group 1: Advanced Micro Devices (AMD) - AMD has seen significant growth due to the rising demand for its chips in various applications, including PCs, servers, and gaming consoles [4] - In Q1 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, primarily driven by the data center and PC markets [5] - The data center segment accounted for 81% of AMD's revenue, with data center revenue up by 57% and PC revenue up by 68% year-over-year [5] - AMD estimates a $500 billion annual revenue opportunity in the AI accelerator chip market by 2028 [6] - The company generated $12.6 billion in data center chip sales last year, nearly double the revenue from 2023, indicating sustainable growth [7] - AMD is expected to benefit from the AI PC market, projected to grow at an annual rate of 42% through 2028 [8] - Consensus estimates project a 17% increase in AMD's earnings this year, followed by a 45% increase in 2026 [9] Group 2: Micron Technology - Micron manufactures memory chips used in computing and storage, with strong demand for high-bandwidth memory (HBM) in AI accelerators [10][11] - Micron is increasing its HBM production capacity, raising capital expenditure to $14 billion from $8.1 billion, as the HBM market is expected to grow to $100 billion by 2030 [12] - The average DRAM content in smartphones and PCs is expected to increase due to AI adoption, with smartphones moving to 12GB and PCs to at least 16GB [13][14] - Micron's adjusted earnings tripled to $1.91 per share, with a 37% increase in revenue, and analysts forecast a sixfold increase in earnings for the current fiscal year [15][17] Group 3: Comparative Analysis - Both AMD and Micron are experiencing solid growth, but Micron is growing at a faster pace due to favorable demand-supply dynamics in the memory industry [18] - Micron is trading at a significantly cheaper valuation compared to AMD, despite its stronger growth prospects [18] - Investors seeking a mix of value and growth may prefer Micron due to its attractive valuation and potential for phenomenal earnings growth, while AMD remains a strong long-term investment [20]