Nvidia (NASDAQ: NVDA) was one of the best-performing stocks in 2024 with an incredible gain of 171%. The upside was driven by soaring demand for its data center graphics processing units (GPUs), which are the gold standard for developing artificial intelligence (AI).

But the AI hardware race is heating up, and some of Nvidia's peers including Advanced Micro Devices (AMD 0.75%) and Micron Technology (MU 4.82%) might also be great buys. Both of those companies have recently delivered record financial results on the back of AI chip sales, yet their stock prices are down significantly from their 52-week highs.

AMD and Micron are starting to look like a very good value, so here's why investors might want to buy both in 2025.

Image source: Getty Images.

The case for Advanced Micro Devices

AMD is a titan in the world of consumer electronics, because its chips power everything from the infotainment systems in Tesla's electric vehicles to Microsoft's Xbox game console. But the company stepped up to compete with Nvidia in the data center by launching its own range of AI GPUs in late 2023, starting with the MI300X.

Although the MI300X hit the market more than a year after Nvidia's H100, it successfully won many top AI customers like Microsoft, Oracle, and Meta Platforms, some of which have yielded lower costs and better performance by using the AMD product. AMD is ramping up its pace of innovation, unveiling a new GPU architecture called Compute DNA (CDNA) 4 last year, to compete with Nvidia's industry-leading Blackwell architecture.

CDNA 4-based GPUs like the upcoming MI350 will deliver a whopping 35 times more performance than CDNA 3 variants like the MI300, paving the way for developers to deploy the most advanced AI models so far. AMD originally expected to start shipping the MI350 in the second half of 2025, but it's significantly ahead of schedule and will send samples to customers this quarter, with production set to ramp up into the middle of the year.

AI models are becoming more efficient, and personal computers (PCs), smartphones, and other devices will soon pack enough computing power to run them locally, which reduces the reliance on external data centers. AMD's Ryzen AI 300 Series are the best AI chips in the industry for PCs, and the company expects over 100 commercial platforms to use them in 2025 from top manufacturers like HP, Microsoft, Lenovo, and more.

AMD recently reported its financial results for 2024, and it generated a record $12.6 billion in data center revenue, which was a 94% increase from 2023. That included $5 billion in GPU sales alone. Revenue from its client segment -- which is home to the Ryzen AI PC chips -- jumped 52% to $7 billion.

That's why AMD stock is starting to look like a great value. Based on the company's $3.31 in adjusted earnings per share (EPS) last year, its stock trades at a price-to-earnings (P/E) ratio of 32.6, which is a 34% discount to Nvidia's P/E of 49.7.

Wall Street expects AMD to deliver earnings growth of 43% during 2025 (according to Yahoo!), so its stock looks even cheaper on a forward basis. That's a key reason why I think it could be a great buy this year.

The case for Micron Technology

Micron is a leading supplier of memory chips for a range of applications including the data center, where they complement GPUs in AI workloads. Memory stores information in a ready state, which the GPU can call upon immediately in training and inference settings to speed up processing time. Micron's HBM3E (high-bandwidth memory) solutions are the best in the industry, delivering 50% more capacity while consuming 30% less energy than the competition.

Nvidia chose Micron's HBM3E hardware to power its new Blackwell GB200 GPU, which is the most advanced AI chip currently on the market. Demand has been so strong that Micron's data center memory solutions are sold out until 2026, and that momentum is unlikely to slow down. The company expects its addressable market in this segment to grow to $100 billion per year by 2030 -- an enormous jump from its value of $16 billion today.

As a result, Micron is already working on a new HBM4E solution, which is expected to deliver a 50% leap in performance from the current generation.

Micron generated $8.7 billion in revenue during its fiscal 2025 first quarter (ended Nov. 28), which was an 84% increase from the year-ago period. Its data center revenue, specifically, rose by 400% to $4.4 billion, making up half of the company's total revenue for the first time.

But as is the case with AMD, Micron's AI opportunity is much bigger than the data center. The company says new PCs fitted with AI processors require between 16 gigabytes and 24 gigabytes of DRAM (memory) capacity, which is up from 12 gigabytes, on average, in non-AI PCs last year. There is a similar shift in the smartphone industry, with several manufacturers recently announcing Android-powered devices with up to 16 gigabytes of memory to handle AI workloads. These consumer segments could be major sources of growth for Micron in the future.

Wall Street's consensus forecast (provided by Yahoo!) suggests Micron could deliver $6.89 in EPS during fiscal 2025, placing its stock at a forward P/E ratio of just 13.8. That's a steep discount to the forward P/Es of both Nvidia and AMD:

NVDA PE Ratio (Forward) data by YCharts

Therefore, given Micron's incredible growth, its stock might be one of the biggest bargains in the AI chip space right now.