AMD or Super Micro Computer: Analysts pick the superior AI stock to buy ahead of earnings

AI is today’s ‘shiny new thing’, the technological advance that will forever change the world we live in. Imagine the advent of metal smelting or the invention of the electric telegraph – AI has a similar impact on our lives, an impact that is compounded by our dependence on technology of all kinds, especially digital technology.

The main benefit of AI is its potential to increase productivity. Programmers can already put AI to work on a wide range of automated tasks, and companies are using AI to get more output from less input. Artificial intelligence takes some of the workload from human intelligence and lets us focus on the things that we consider really important.

AI is also creating numerous opportunities in the stock markets as the companies involved in the development and expansion of AI technology reap the benefits of increased profits and increased investment activity. These AI stocks are shaping the financial future, and Wall Street analysts are taking notice.

Two companies — Advanced Micro Devices ( NASDAQ:AMD ) and Super Micro Computer ( NASDAQ:SMCI ) , each a household name in AI technology — have garnered plenty of recent interest as they prepare to announce financial and earnings results. We’ve opened up the TipRanks database to get a bigger picture of both, and to find out which one analysts have tagged as the superior AI stock to buy ahead of the earnings announcement. Let’s dive in.

Advanced Micro Devices (AMD)

We start with AMD, one of the semiconductor industry’s leading innovators. While not quite in the same league as market leader Nvidia, AMD’s $265 billion market capitalization still makes it the world’s sixth-largest chip maker, and the company is pursuing a plan to expand its market share in the lucrative—that is, large and growing—market for AI -compatible semiconductor chips.

AMD has recently introduced a number of new products, including leading PC processors and AI-enabled accelerators. The Ryzen AI PRO 300 series is a set of AI-enabled mobile processors designed for the PC market to bring AI performance to business applications; The Instinct MI325X accelerators represent a series of new accelerator chips created for the generative AI and data center market; and the EPYC CPUs are 5th generation processors developed for AI, cloud and enterprise use. The common denominator here is a full court press into the forefront of the AI ​​market, a corporate strategy to increase market share by offering indispensable quality.

AMD does not offer these chip lines in a vacuum. The company builds on its successful MI300 accelerator series and already has strong relationships with such big AI names as Meta, Oracle and Microsoft. The AI ​​chip market is expanding rapidly and is expected to reach as high as $92 billion in total global revenue by the end of next year. AMD wants to make sure it can take a bigger piece of that pie than it has now.

The chip maker is due to release its earnings numbers today, October 29, after the markets close. The Street expects to see roughly $6.7 billion on the top line, paired with EPS of 92 cents, in the 3Q24 release. In comparison, the company generated $5.84 billion in revenue and realized 69 cents per share in Q2, beating forecasts by $113.8 million and 1 cent, respectively.

For Stifel analyst Ruben Roy, the earnings outlook for AMD is reasonable, and investors should find plenty of reason to expect AMD to continue to grow going forward.

“We expect September quarter revenue in line to be modestly above the $6.7bn (+15.5% y/y, +14.8% q/q) guidance midpoint driven by continued momentum in the Data Center segment , which we model up by 20% q/q We expect the outlook for the December quarter to be positively skewed with a further increase to full-year MI300 revenue expectations benefit from various mid-term growth drivers, including (i) AI infrastructure investments, (ii) continued x86 CPU share gains and (iii) an AI-driven PC refresh cycle that we expect to accelerate in 2025,” Roy opined.

To this end, the analyst puts a Buy rating on AMD stock, and his price target of $200 implies a 22% gain in the coming months. (Click here to see Roy’s track record)

This outlook is in line with the bullish view of the Street. AMD stock has a Strong Buy consensus rating based on 31 recent analyst reviews, which include 25 Buys to 6 Holds. Shares are priced at $163.87, and the average price target of $188.54 suggests upside of nearly 15% on a one-year horizon. (See AMD stock forecast)

Super micro computer

The next stock reviewed is SMCI, a leader in advanced, AI-enabled computer hardware. The company designs, develops and manufactures advanced computing systems needed to run AI applications. This includes enterprise-scale server stacks, high-performance computing and solid-state memory systems that form the backbone of hardware infrastructure critical to AI. In addition, these systems support a variety of advanced data center applications, such as cloud computing, edge computing and even 5G networks.

Super Micro Computer has been in the business of building top-end computer systems since 1993, and in that time the company has become the industry’s ‘one stop shop’ for custom high-end computing needs. Super Micro’s main claim is that it can design and build its products – server stacks and HPCs – to any specification, no matter how unique or demanding. The company has in-house design and build capabilities and fills orders with a combination of custom-made units and off-the-shelf parts – and can fill those orders at any scale across a wide range of applications.

The company backs this guarantee to meet orders with a solid manufacturing footprint, over 6 million square feet of total manufacturing floor space and global operations spanning more than 100 countries. Super Micro can maintain a high production output, completing as many as 5,000 AI systems, HPCs and liquid cooling racks every month. The company currently ships more than 100,000 GPUs per quarter.

While Super Micro has benefited greatly from the AI ​​boom in the past few years, we should note that the stock peaked in March of this year and has fallen since. Some of the recent headwinds hitting the stock have come from government officials — the Justice Department is investigating potential accounting violations, and the investigation caused the company to fall out of compliance with NASDAQ rules regarding regulatory filings. Despite these bureaucratic and legal issues, however, Super Micro was able to complete a planned 10-for-1 stock split last October 1st.

On the financial side, Super Micro’s performance has been solid. Revenue increased from $7.2 billion in fiscal 2023 to $14.94 billion in fiscal 2024. For fiscal 1Q25, analysts expect revenue to reach $6.46 billion, indicating continued strong growth momentum.

While the company is an established name in the AI ​​world and has a solid niche, Barclays analyst George Wang sees it facing a number of challenges in the short and medium term.

“Our more cautious view (is) mainly due to lack of visibility on forward AI server GM trends, ongoing customer erosion (ie loss of market share), weaker competitive position in the GB200 era (declining market share) with higher working capital requirements, and room for improvement in terms of internal controls and corporate governance We would like to see more transparency in quarterly order intake and order book While we remain positive on the long-term outlook related to AI, we believe that the current risk/reward is balanced for SMCI,” Wang explained.

Following this stance, Wang assigned an Equal Weight (i.e. Neutral) rating on SMCI stock with a price target of $42, suggesting a one-year stock write-down of 14.5%. (Click here to see Wang’s track record)

Wang’s caution is shared by many analysts: of 12 covering SMCI, 3 rate it a buy, while 9 issue a hold. Nevertheless, the stock’s consensus price target of $64.49 suggests a possible 31% upside from its current trading level. However, that upside does not justify the risk in the eyes of analysts. (See SMCI stock forecast)

With the data in, it seems clear that Wall Street analysts favor AMD over Super Micro Computer as the superior AI stock to buy ahead of the companies’ upcoming earnings releases.

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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.