AMD vs. ARM: AMD Is Winning Today, But Arm May Be Building Something Even Bigger

Advanced Micro Devices (AMD) and Arm Holdings Plc (ARM) have spent the past year at the expense of one company, Intel (INTC), by shrinking its server business. Both have taken chunks out of the longtime leader. In the first quarter, AMD lifted its server CPU share from 24.1% to 27.4%. Arm-based chips also jumped from 11.5% to 17.7% in a year. In contrast, Intel slid from 64.4% to 54.9%. 

For a while, the two rising players were partners in the same story. That has lately started to change. 

The shift came in March, when Arm did something it had never done in three decades. It launched its own data center chip, the AGI CPU, rather than just licensing its designs to others. That move put Arm in direct competition with AMD’s EPYC processors for the first time. It also drew an Federal Trade Commission (FTC) antitrust probe, since Arm now sells a chip while still controlling the licenses that rivals like Nvidia (NVDA) and Amazon (AMZN) depend upon. 

Arm’s pitch is power efficiency, which matters enormously in data centers as electricity is now the real limit. The company says its architecture now accounts for roughly half of CPU compute among the largest hyperscale cloud providers. 

Deciding on which threat matters more to Intel comes down to how far ahead you look. AMD is the one currently winning. Its EPYC server chips are pulling in real customers and real revenue, with data center sales growing fast and hyperscalers lining up for its latest processors. The proof shows up in shipped products and rising market share, not promises. 

However, Arm’s challenge is bigger in scope but slower to arrive. Its own data center chip is only just reaching the market and will take time to turn into meaningful sales. Arm is actually selling long-term shift, a bet that its power-efficient architecture becomes the default foundation for AI computing. So the two are really competing on different timelines. AMD is proving it can deliver today, while Arm is trying to change the rules in which everyone else plays. For investors, this is the choice to make. Back the company executing now or the one reshaping the field for later. 

Both Are Priced for Perfection, One More Than the Other

AMD and Arm carry two of the higher valuations in the chip space, though what you get for the price is not the same. AMD trades at a forward price-to-earnings ratio of 89.89 times, which looks steep on its own but is actually 6.3% below its 5-year average. In comparison, Arm trades at a much higher forward price-to-earnings ratio of 188.85 times. In terms of the price-to-sales ratio, AMD trades at 15.87 times, which is 90.3% above its historical norms but still significantly cheaper than Arm, which trades at 42.20 times. 

The EPS outlook of the two companies looks considerably different, and it aligns with AMD executing now while Arm is reshaping the field for later. Analysts expect AMD to surge sharply by 79% in 2026 and 86% in 2027, before slowing down to 45% in 2028 and 21% in 2029. In contrast, Arm’s growth is expected to rise across the decade, going from 26% in fiscal 2027 to over 51% by 2030. Both companies run strong balance sheets, being comfortably net cash positive, so neither carries much financial strain. The takeaway lines up with the rivalry itself. AMD asks a high price for profits arriving today, while Arm asks an even higher one for a future it still has to prove. 

Chip Stock # 1: Arm Holdings 

Arm Holdings is focused on the development, research, licensing, and marketing of graphics processing unit IP, microprocessors, compute subsystems (CSS), physical IP, systems IP, and associated systems IP, software, and tools. It operates in the United States, Taiwan, China, Korea, Japan, and other international markets. The company was incorporated in 1990 and is headquartered in Cambridge, U.K. 

Over the past 12 months, ARM has lagged behind the broader semiconductor sector. The stock gained 93.82%, while the Semiconductor iShares ETF (SOXX) delivered a much stronger 121.8% return during the same time period. However, the trend has reversed in 2026. Year-to-date (YTD), Arm Holdings has increased 148.3%, outperforming the broader semiconductor sector by a wide margin. In comparison, the iShares Semiconductor ETF has gained 77.1%, while the stock has delivered nearly double that return. 

The company reported its first-quarter fiscal 2027 earnings on July 29, beating both revenue and earnings estimates. Revenue for the quarter came in at $1.29 billion, exceeding market expectations by $20 million. This marks a 22.9% increase in revenue from the same period last year. Arm Holdings posted non-GAAP earnings of $0.45 per share, beating consensus estimates by $0.05. Looking ahead, management guided for second-quarter revenue of $1.34 billion. On the earnings side, it projects EPS of $0.44. 

Following the company’s earnings, Morgan Stanley raised its price target on the stock from $202 to $212 while keeping a “Hold” rating on July 30. On a bearish note, HSBC lowered its price target from $315 to $230, while also maintaining a "Hold" rating. The stock currently enjoys a consensus “Moderate Buy” rating from 31 Wall Street analysts covering it. Based on their estimates, it has an average price target of $285.44, reflecting a further 5.5% upside from the current share price. The highest price target of $500 suggests the stock could gain as much as 84.8% from here. 

Chip Stock # 2: Advanced Micro Devices

Advanced Micro Devices operates as a leading semiconductor company that designs chips for gaming, personal computers, AI applications, data centers, and embedded systems. The company’s operations are divided across three business segments: Data Center, Embedded, and Client and Gaming. It serves public cloud service providers, distributors, original equipment and design manufacturers, system integrators, and other technology companies across global markets. 

Over the past year, AMD has delivered outstanding returns, surging 191.7% and comfortably outperforming the Semiconductor iShares ETF's 122.1% increase. Moreover, the stock has delivered even stronger returns so far this year. It has gained 140.8% while the iShares Semiconductor ETF is up 77.3%. 

The company posted its first-quarter fiscal 2026 results on May 5, reporting revenue of $10.3 billion. Diluted earnings for the quarter came in at $1.37 per share. The Data Center segment remained AMD’s strongest growth engine, with revenue growing 57% year-over-year (YOY) to $5.8 billion. Meanwhile, Client and Gaming segment revenue grew 23% to $3.6 billion while the Embedded segment revenue rose 6% to $873 million. During the quarter, Advanced Micro generated $3 billion in cash from continuing operations and a record $2.6 billion in free cash flow, equal to 25% of revenue. For the second quarter, revenue is estimated at approximately $11.2 billion, with a possible variation of $300 million. The company also projects a non-GAAP gross margin of around 56% and non-GAAP operating expenses of approximately $3.3 billion.

Susquehanna raised its price target on AMD from $450 to $500 on July 30 while maintaining its “Buy” rating. Mizuho Securities also increased its price target from $615 to $625, reiterating its “Buy” rating. Overall, the stock is covered by 45 Wall Street analysts and holds a consensus “Strong Buy” rating. The median price target of $582.61 indicates 11.2% upside. The highest price target of $1250 implies an extraordinary 140% upside from the current levels.