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Better Artificial Intelligence (AI) Stock: Advanced Micro Devices vs. Marvell Technology | The Motley Fool

Better Artificial Intelligence (AI) Stock: Advanced Micro Devices vs. Marvell Technology | The Motley Fool
These chip stocks have struggled for growth this year, but AI could help them make a comeback.

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Semiconductor stocks have seen a surge in 2024, with the PHLX Semiconductor Sector index gaining 33%, outperforming the S&P 500 index. However, not all semiconductor stocks have benefited from this surge, with Advanced Micro Devices (AMD) and Marvell Technology (MRVL) recording gains of just 9% and 19% respectively. Both companies are getting a boost from the growing demand for AI chips, but which one should investors bet on?

AMD's chips are used in PCs and data centers, with the company expecting the market for AI-focused data center chips to grow from $45 billion last year to $400 billion by 2027. AMD's data center revenue increased 80% year over year in the first quarter of 2024, and the company is expected to sustain strong growth over the next couple of years.

On the other hand, Marvell Technology is targeting a different niche of the data center market, selling custom chips programmed to perform specific tasks. The company reported an 87% year-over-year increase in data center revenue in the previous quarter and is forecasting a substantial ramp in custom AI chip production in the second half of this year.

Both companies have the potential to become top AI investments in the long run, but investors may have a tough time choosing between them. However, AMD's bigger AI-related addressable market could help it grow at a faster pace in the long run, making it the preferred choice for investors.

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