Apple (NASDAQ: AAPL) and Advanced Micro Devices (NASDAQ: AMD) mostly operate in different areas of the tech market, with one dominating consumer products and the other a leading chipmaker. These companies have some similarities, with Apple venturing into chip production in 2020 after ending its partnership with Intel in favor of homegrown hardware. Meanwhile, AMD’s client segment includes income from chip sales directly to consumers, which are popular among PC gamers.
These companies have also gained a reputation of being attractive growth stocks. In fact, Apple’s annual revenue has climbed 52% over the last five years, while AMD’s soared 265%. And in the same period, both tech giants have delivered stock growth above 200%.
A boom in artificial intelligence (AI) this year has brought further comparisons between these companies, with Apple and AMD heavily investing in the high-growth sector. As a result, you might be wondering whether established tech behemoth Apple or up-and-coming chipmaker AMD makes a better investment.
So, let’s assess whether Apple or AMD is the better growth stock this month.
Apple: The king of reliability
As the most valuable company in the world, with a market cap of $2.7 trillion, Apple has long been regarded as one of the most reliable tech stocks. The company became a haven for investors amid last year’s economic downturn, consistently outperforming the market and its peers. The chart below illustrates this, with Apple shares experiencing a more moderate decline than some of the biggest names in tech (including AMD) and the Nasdaq Composite index throughout 2022.
Data by YCharts
Apple’s resilience has continued into 2023 despite conditions proving more challenging than last year. Macroeconomic headwinds have caught up with the iPhone company, which posted three consecutive quarters of revenue declines as hikes in inflation caused reductions in consumer spending. Yet, its stock has risen 37% since Jan. 1. The company’s years of market dominance and consistent growth mean investors are more likely to hold Apple stock during uncertain times.
Wall Street’s faith in Apple’s long-term future isn’t unfounded. Despite tech market challenges, the company continued to deliver higher product sales than its competitors in smartphones and personal computers. Meanwhile, its digital services segment has proven less vulnerable to macroeconomic headwinds, reporting stellar growth over the last year.
Alongside expanding positions in AI and virtual/augmented reality, Apple has much to offer investors once economic hurdles subside.
Advanced Micro Devices: Recent volatility but massive growth potential
AMD investors have been on a roller coaster in recent years. Its stock hit record highs during 2021 when COVID-19 lockdowns led to increased sales of its consumer chips, and hybrid working styles meant higher demand for cloud computing hardware.
However, rises in interest rates and the cost of living last year brought AMD’s stock crashing back down. Its business proved particularly vulnerable to macroeconomic headwinds, burdened by steep declines in the PC market.
In 2023, shares in AMD once again moved the opposite way, climbing about 66% year to date. While the company’s PC-centered business still has yet to improve, its stock benefited from increased interest in AI. AMD has pivoted its business to the booming market and could become a major player in AI over the long term.
AMD’s biggest competitor, Nvidia, took the lead in AI in 2023, becoming the go-to chip supplier for the market. Lack of competition allowed Nvidia to massively profit from increased demand for graphics processing units (GPUs), with AMD left playing catch-up.
However, AMD has plans to challenge Nvidia in 2024 with the launch of a new GPU. Meanwhile, AMD’s CEO Lisa Su promised that five years from now, “you will see AI in every single product at AMD, and it will be the largest growth driver.”
AMD has a mountain to climb in getting its PC business back on track as it continues to contend with market declines. However, the company’s focus on AI could mean a lucrative future over the long term.
Is Apple or AMD the better growth stock?
Apple and AMD enjoyed considerable stock growth this year as advances in tech reignited optimism in the market. However, both companies also experienced repeated declines in revenue. As a result, it’s wise to be cautious with these stocks and choose the more reliable option. And in this case, the clear choice is Apple.
These companies may continue to suffer from economic challenges in the short term. However, there’s a clear difference between Apple’s current position atop the consumer tech industry and AMD’s plans to take on Nvidia in AI.
Apple’s dominance will likely prove an asset once the market rebounds, with its expanding services business strengthening its earnings potential. Meanwhile, there are too many variables to have the same confidence that AMD can definitely steal significant market share from Nvidia.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon.com, Apple, and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
