Key Points
Advanced Micro Devices is expanding in the AI accelerator market, with OpenAI and Meta Platforms each signed to agreements covering up to 6 gigawatts of AMD GPUs.
Dell Technologies supplies end-to-end IT infrastructure at global scale and exited its July quarter with a record $95 billion backlog in its AI server business.
Dell trades at a fraction of AMD's forward earnings multiple, and the choice between them comes down to growth at a premium versus growth at a value price.
As the artificial intelligence era moves from experimentation to massive infrastructure deployment, investors are comparing Advanced Micro Devices (NASDAQ:AMD) and Dell Technologies (NYSE:DELL) to find the best way to profit.
While both companies are central to modern computing, they serve different functions. One designs the advanced chips that power complex calculations, while the other assembles the servers and storage systems that businesses rely on. Understanding their distinct business models is key to choosing the right stock.
The case for Advanced Micro Devices
Advanced Micro Devices designs high-performance, adaptive computing products for a wide range of customers across the cloud, embedded systems, and gaming markets.
The company is a key player in the semiconductor sector, providing essential processors for data centers and personal computers. Its semi-custom chips power the Sony (NYSE:SONY) PlayStation 5 and the Microsoft (NASDAQ:MSFT) Xbox Series consoles, according to its latest annual report.
In October 2025, the company also entered into a multiyear agreement with OpenAI to deploy up to 6 gigawatts of AMD GPUs, and in February 2026, it signed a similar 6-gigawatt agreement with Meta Platforms(NASDAQ:META).
Both customers received warrants to buy up to 160 million AMD shares each at $0.01 per share, with vesting contingent on purchases and stock price milestones being met.
AMD's annual report says it depends on a small number of customers for a substantial portion of its business, and one customer accounted for 11% of its receivables at the end of 2025. This level of customer concentration adds risk to the business.
In the fiscal year ended Dec. 27, 2025, revenue reached nearly $34.6 billion, up about 34.3% from the prior fiscal year. Strong demand for its AI infrastructure and data center products drove this increase.
The company reported net income of roughly $4.3 billion for the same period. This marks a substantial improvement in profitability as the company scales its newest chip architectures.
Growth has accelerated since. In the second quarter of 2026, ended June 27, revenue rose 50% year over year to $11.5 billion and net income reached $2.3 billion, with data center revenue up 107% to $6.7 billion.
Management guided third-quarter revenue to approximately $13 billion, plus or minus $300 million. On Sept. 28, 2026, AMD announced an agreement to acquire World Labs, the spatial-intelligence lab led by Fei-Fei Li, for approximately $8.2 billion in AMD stock, with closing expected by the end of 2026.
As of its December 2025 balance sheet, the company maintains a very healthy financial position with a debt-to-equity ratio of about 0.05x, based on total debt of $3.2 billion against $63 billion of stockholders' equity. This ratio, which measures total debt relative to shareholders' equity, indicates that the company carries very little debt relative to its equity base.
The current ratio is approximately 2.9x, indicating the company has $2.90 in short-term assets for every $1.00 in short-term liabilities. Free cash flow from continuing operations for the fiscal year ended Dec. 27, 2025, was about $5.5 billion, or operating cash flow of $6.5 billion less $974 million of capital expenditures.
Operating cash flow including the divested ZT Systems manufacturing business was $7.7 billion. Note that stock-based compensation of $1.6 billion represented roughly 25% of operating cash flow from continuing operations, inflating reported cash generation, since SBC is a non-cash expense added back in the cash flow statement. The debt picture has also changed.
In August 2026, AMD issued $4.75 billion of senior notes for general corporate purposes, more than doubling the $3.25 billion of note principal on its June balance sheet.
The case for Dell Technologies
Dell Technologies provides a broad range of hardware and software solutions, from personal laptops to complex data center infrastructure.
The company serves a diverse global customer base, including large enterprises, public institutions, and small businesses. Its infrastructure segment is currently seeing high demand for AI-optimized servers and storage solutions that help organizations manage massive datasets.
Although the company no longer serves as a primary distributor for stand-alone VMware products, it continues to integrate those solutions into its specialized hardware offerings. Dell uses both a direct sales force and a global partner network to reach international markets.
According to its latest annual report for the fiscal year ended Jan. 30, 2026, revenue reached approximately $113.5 billion. This was an increase of nearly 18.8% year over year, reflecting a recovery in the PC market and growth in AI-related hardware.
Net income for the period was about $5.9 billion, for a net margin of roughly 5.2%. This net margin, which measures the percentage of revenue remaining as profit after all expenses, shows the company operates with thinner margins than specialized chip designers but makes up for it with massive volume.
The newest quarter showed a step change. In the second quarter of fiscal 2027, ended July 31, 2026, revenue rose 58% year over year to a record $47.0 billion and net income reached $4.1 billion.
The AI server business booked a record $60.9 billion in orders, recognized $16.4 billion in revenue, and exited the quarter with a record $95 billion backlog. Management raised its full-year fiscal 2027 revenue outlook by $25 billion to $192 billion.
As of its January 2026 balance sheet, the company reported negative stockholders' equity of $2.5 billion and total debt of $31.5 billion, so a meaningful debt-to-equity ratio cannot be calculated. Years of share repurchases, including $6 billion in fiscal 2026 alone, have left total liabilities above total assets.
The current ratio is roughly 0.9x, which measures the ability to cover short-term liabilities with short-term assets. Despite these balance sheet figures, the company generates significant cash, reporting free cash flow of nearly $8.6 billion for the fiscal year ended Jan. 30, 2026, measured as operating cash flow of $11.2 billion less $2.6 billion of capital expenditures and capitalized software costs.
This cash flow provides the company with the flexibility to fund operations and return capital to shareholders through dividends and share repurchases.
Dell said it returned a record $4.3 billion to shareholders in the July quarter, and its board declared a quarterly dividend of $0.63 per share.
Risk profile comparison
Advanced Micro Devices faces intense competition in the data center and PC markets from Intel (NASDAQ:INTC) and Nvidia (NASDAQ:NVDA).
The company also faces significant geopolitical risks, particularly U.S. export controls on AI chips for the China market. Restrictions on its MI308 data center GPUs led to approximately $800 million in inventory and related charges in the second quarter of 2025, though AMD released about $360 million of that reserve in the fourth quarter.
Furthermore, the company relies heavily on third-party manufacturers like Taiwan Semiconductor Manufacturing (NYSE:TSM) and GlobalFoundries (NASDAQ:GFS) for wafer fabrication.
Disruptions in these manufacturing relationships or capacity constraints could significantly affect product supply. Shareholders also face dilution. The OpenAI and Meta warrants cover up to 320 million shares combined, nearly a fifth of the 1.63 billion shares outstanding in July 2026, and the World Labs purchase will be paid in stock.
Dell Technologies operates in the highly competitive IT infrastructure and PC markets, where it faces pressure from both traditional hardware brands and large infrastructure-as-a-service providers.
The company also faces cybersecurity risks, as any compromise of sensitive data could trigger regulatory investigations or reputational damage. Its supply chain depends on a few contract manufacturers, primarily located in Asia, and on single-source or limited-source suppliers for some components, making it vulnerable to geopolitical disruptions and price volatility.
Additionally, the company's negative equity and $34.5 billion of total debt as of July 31, 2026, leave less cushion than AMD's balance sheet if AI server demand slows, and its recurring-revenue contracts allow customers to reduce usage or terminate early.
Valuation comparison
Dell Technologies appears to be the more value-oriented investment given its lower revenue and earnings multiples, whereas Advanced Micro Devices trades at a premium.
| Metric | Advanced Micro Devices | Dell Technologies |
|---|---|---|
| Forward P/E | 70.4x | 17.6x |
| P/S ratio | 21.3x | 1.9x |
Valuation metrics include sourcing from Financial Modeling Prep (FMP) and may differ from other data providers.
Which stock would I buy in 2026?
Dell is the better buy today, but its stock has already roughly tripled over the past year, so the case from here rests on a record backlog converting into profit.
That backlog stood at $95 billion after the quarter ended July 31, 2026, when revenue grew by more than half and management sharply raised its full-year revenue outlook. For a company trading at a fraction of AMD's earnings multiple, that's an unusual mix of hypergrowth and a value price.
The balance sheet is the catch. Dell carries a heavy debt load against negative equity, and its margins are thin enough that a pause in AI spending could quickly show up in results.
AMD looks like the stronger business over the next decade, and the latest quarter showed why. Data center revenue more than doubled, and both OpenAI and Meta have signed agreements covering up to 6 gigawatts of AMD GPUs apiece. The price already reflects that. Shares trade at a forward earnings multiple several times that of Dell, and dilution is coming.
Each of those two customers holds penny warrants that could vest into nearly a tenth of the share count, and the all-stock World Labs purchase adds more shares on top. I'd want a better entry price before owning the chipmaker's long-term story.
Dell wins this comparison on price, while AMD remains the one to watch on the next pullback.
Mike Schwenk has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Globalfoundries, Intel, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.