Advanced Micro Devices (NASDAQ:AMD), the second-largest maker of x86 CPUs and GPUs in the world, was once just a scrappy start-up based in a living room. It was founded in 1969, just one year after its rival Intel (NASDAQ:INTC), and both chipmakers' founders were former employees of Fairchild Semiconductor.

AMD was initially a "second source" chip designer that modified chips from bigger firms like Fairchild. It eventually gained more customers across multiple industries, and went public in 1972. Let's take a look back at AMD's IPO to see how much an investment of $1,000 (just over $6,000 in 2019 dollars) would be worth today.

AMD CEO Lisa Su.

AMD CEO Lisa Su. Image source: AMD.

Doing the math

AMD went public at $15 a share, so you could have bought 66 shares for $1,000. AMD's stock subsequently split six times, so you would currently own 1,782 shares, which would be worth nearly $70,000 today. AMD hasn't ever paid a dividend.

AMD's return outperformed the S&P 500's 2,690% return during that same period. However, investors would have made a lot more money by investing in Intel's IPO a year earlier.

Intel went public at $23.50 in Oct. 1972, so you could have bought 42 shares with $1,000. Intel's stock split 13 times since then, so that position would have grown to 51,030 shares -- which would be worth $2.94 million today, and would be paying out over $64,000 in annual dividends.

Why did AMD struggle to catch up to Intel?

Intel and AMD's paths diverged in the late 1970s. Intel launched the first x86 microprocessors in 1978, and that architecture remains the industry standard for PCs and servers today. At the time, AMD produced other chips like logic chips and RAM.

Intel signed a technology exchange agreement with AMD in 1982, which allowed each company to redesign and sell chips developed by the other. This agreement formed the foundation of AMD's own x86 CPU business, but Intel stopped sharing its x86 designs with AMD in 1985, which forced the chipmaker to develop its own designs.

AMD continued to reverse-engineer Intel's x86 CPU designs for years, but its merger with chipmaker NexGen in 1996 eventually allowed it to develop original CPUs in the late 1990s. That shift enabled it to gain market share against Intel, but a series of management shifts and weaker chip designs allowed Intel to strike back.

AMD expanded into the GPU market by buying ATI in 2006, but this led to a war with NVIDIA (NASDAQ:NVDA). Fighting wars on two fronts against Intel and NVIDIA was exhausting and costly, and many bulls abandoned the stock. A comparison of AMD and Intel's revenue illustrates just how much the two chipmakers' growth diverged over the past three decades:

AMD Revenue (TTM) Chart

AMD Revenue (TTM) data by YCharts

But is AMD making a comeback against Intel?

AMD struggled to keep pace with Intel in the past, but investors shouldn't ever judge a stock by its past performance. If they did that, they would overlook AMD's impressive comeback over the past five years under the leadership of CEO Lisa Su.

Today, AMD's APUs -- which merge a CPU and GPU into a single chip -- power the PS4 and Xbox One. AMD's chips will also power the upcoming PS5 and next-gen Xbox.

AMD's new Ryzen CPUs, which roughly match Intel's comparable CPUs at lower prices, are gaining ground against Intel again in the PC and data center markets. Intel's ongoing chip shortage also pushed OEMs toward AMD's new chips.

In the GPU market, AMD's newest Radeon GPUs are arguably matching NVIDIA's offerings blow-for-blow in both the low-end and high-end markets. Simply put, Lisa Su's AMD is evolving quickly into a major threat to Intel and NVIDIA.

Hindsight is always 20/20

It's easy to see that Intel was a stronger overall investment than AMD over the past few decades, but hindsight is always 20/20. Both chipmakers seemed like speculative bets in the early 1970s, and few people likely saw the two companies holding a near-duopoly in CPUs in the early 21st century. AMD remains the underdog in the CPU and GPU markets, but it still has plenty of bite, and could still outperform Intel or NVIDIA in the coming decades.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.