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

The main virtue of AI is its potential to boost productivity. Programmers can already use AI for a wide range of automated tasks, and companies are using AI to get more output from less input. Artificial intelligence takes away some of the workload of human intelligence, allowing us to focus on the things we really care about.

AI also creates numerous opportunities in the stock markets, as the companies involved in developing and expanding AI technology reap the benefits of higher 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 attracted a lot of attention lately as they prepare to release financial and earnings results. We opened up the TipRanks database to get a better sense of both, and to find out which stock the analysts have identified as the superior AI stock to buy ahead of the earnings release. Let’s dive in.

Advanced Micro Devices (AMD)

We’ll 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 cap still makes it the sixth-largest chipmaker in the world, and the company is acting on a plan to increase its market share in the lucrative – i.e. large and growing – market for semiconductor chips suitable for AI.

AMD has recently introduced a number of new products, including industry-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 headline a range of new accelerator chips built specifically for the generative AI and data center markets; and the EPYC CPUs are 5th generation processors designed for AI, cloud, and enterprise use. The common denominator here is a full press at the forefront of the AI ​​market, a business strategy to increase market share by offering indispensable quality.

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

The chipmaker will announce its earnings results after markets close today, October 29. The Street expects to post 3Q24 revenue of about $6.7 billion, combined with earnings per share of 92 cents. By comparison, the company generated revenue of $5.84 billion in the second quarter and posted revenue of 69 cents per share, beating expectations by $113.8 million and 1 cent, respectively.

According to Stifel analyst Ruben Roy, AMD’s earnings outlook is reasonable, and investors should have plenty of reasons to expect AMD to continue to grow in the future.

“We expect September quarter revenue to be modestly above the midpoint of guidance of $6.7 billion (+15.5% YoY, +14.8% QoQ), driven by continued momentum in the data center segment, which we model by 20% on a quarterly basis. /Q. Similarly, we expect the December quarter outlook to be positively impacted, with a new increase in full-year revenue expectations for the MI300. We continue to believe AMD is positioned to benefit from several medium-term growth drivers, including (i) investments in AI infrastructure, (ii) continued gains in x86 CPU stock, and (iii) an AI-driven PC market innovation cycle, which we expect will continue to grow. accelerate in 2025,” Roy said.

To that end, the analyst gives a buy rating to AMD stock, and his $200 price target implies a 22% upside for the coming months. (To view Roy’s track record, click here)

This outlook is consistent with the Street’s bullish view. AMD stock has a Strong Buy consensus rating, based on 31 recent analyst ratings, including 25 Buys to 6 Holds. The shares are priced at $163.87, and the average price target of $188.54 suggests an upside of almost 15% over one year. (To see AMD Stock Prediction)

Super microcomputer

The next stock under review is SMCI, a leader in high-performance, AI-enabled computer hardware. The company designs, develops and produces advanced computer systems that are essential for running AI applications. This includes enterprise-grade server stacks, high-performance computing, and solid-state memory systems, which form the backbone of the hardware infrastructure critical to AI. Additionally, these systems support a range of advanced data center applications, such as cloud computing, edge computing and even 5G networks.

Super Micro Computer has been building top-of-the-line computer systems since 1993, and in that time the company has grown into 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 devices and off-the-shelf parts – and can fulfill these orders at any scale and for a wide range of applications.

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

While Super Micro has benefited immensely from the AI ​​boom of recent years, we should note that its shares peaked in March this year and have fallen since then. Some of the recent headwinds that have battered the stock have come from government regulators. The Department of Justice is investigating possible accounting violations, and the investigation has led to the company’s failure to comply with NASDAQ rules regarding registration with regulators. Despite these bureaucratic and legal issues, however, Super Micro was able to execute a planned 10-for-1 stock split last October 1.

Financially, Super Micro’s performance was solid. Revenue rose from $7.2 billion in fiscal 2023 to $14.94 billion in fiscal 2024. For the first quarter of 25, 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 future AI server GM trends, continued customer erosion (i.e. market share loss), weaker competitive position in the GB200 era (declining market share) with higher working capital needs , and there is room for improvement in internal controls and corporate governance. We would like to see more transparency in financial disclosure in terms of quarterly order intake and order book. While we remain positive about the long-term prospects for AI, we believe that the current risk-benefit ratio for SMCI is balanced,” Wang explained.

Based on this view, Wang assigned an Equal Weight (i.e. Neutral) rating to SMCI stock, with a price target of $42, suggesting a 14.5% stock decline over one year. (To view Wang’s track record, click here)

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

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

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

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