Chipmakers like Advanced Micro Devices (AMD -0.34%) have garnered much attention in recent years. Chip shortages and macroeconomic headwinds since 2020 dragged down countless stocks. Meanwhile, recent advances in markets like artificial intelligence (AI) and cloud computing have made investors bullish again. 

Despite market fluctuations, AMD has remained a solid growth stock with its shares up 870% in the last five years. The company's diversified business offers the opportunity to back multiple high-growth markets, making it a compelling stock investment.

However, as with most things, there are pros and cons when it comes to this semiconductor company. Here's the bull vs. bear argument for AMD stock. 

Bear: AMD is losing the AI battle

AMD's biggest competitor is no doubt Nvidia (NVDA -3.22%), with both companies rising to positions of dominance thanks to their success in consumer PC components. Their businesses flourished amid the COVID-19 pandemic as home-bound consumers drove up demand for tech. However, AMD and Nvidia also experienced similar stock declines of over 50% in 2022, hit by economic challenges and reductions in consumer spending. 

As a result, Nvidia's stronger position in AI potentially threatens AMD's long-term success. An AI boom was kicked off last November when OpenAI launched ChatGPT, an advanced chatbot capable of composing human-like dialogue. The platform's success has led countless companies to begin developing competing services. Meanwhile, Nvidia's role as the primary supplier of graphics processing units (GPUs) for ChatGPT has sent its stock soaring 85% in 2023. Comparatively, AMD's stock has risen 42% in the same period.

GPUs are critical to run and develop AI software, with research from TrendForce revealing that ChatGPT utilized about 20,000 units in 2020. This figure is expected to soon increase to 30,000 GPUs as ChatGPT prepares for commercialization, and Nvidia is well-positioned to profit substantially from the increase.

Moreover, recent benchmarks from Tom's Hardware, an online technology publication, have shown Nvidia's GPUs outperform AMD's in AI tasks. Consequently, ChatGPT competitors could be more likely to also turn to Nvidia for GPU power, increasing its lead over AMD in the market. 

Bull: An increasingly diversified  business

Despite AMD's weaker status in AI against Nvidia, it is pulling ahead in other aspects of chipmaking. The tech giant is a leader in processors and embedded products, and has an increasingly lucrative semi-custom chips business. AMD's solid diversification was its main driver of growth amid a challenging 2022, with revenue rising 44% in its fiscal year. The same year saw Nvidia's revenue increase by 0.2%, with its business primarily reliant on GPUs.

In 2022, AMD completed its purchase of Xilinx, a company focused on producing specialized processors for industrial, aerospace and defense, and space applications. The acquisition led AMD's embedded segment to report a 1,700% revenue increase to $4.6 billion last year.

Additionally, the company has quickly become a leading name in custom semiconductors. AMD's chips exclusively supply the graphics and processing power to Microsoft's Xbox Series X and Sony's PlayStation 5 consoles. The partnerships have garnered AMD an 83% market share in game console processors, with the company also supplying its chips to multiple handheld gaming devices. 

Nvidia's leading market share in GPUs has given it an edge in AI. However, AMD's priority on growing in various areas of tech fortifies its business against temporary headwinds. 

Is AMD stock a buy?

AMD's stock is trading at a forward price-to-earnings ratio (P/E) of 30, which makes it a bit expensive. However, that figure has decreased by 26% since January 2022 and is preferable to Nvidia's forward P/E of 60.

The company has a solid growth history, with its shares rising over 3,000% in the last decade. AMD's consistent gains make its high P/E less of a concern, as the company will likely continue growing over the long term. 

AMD may be behind Nvidia in AI, but I wouldn't count it out. It remains a robust chipmaker with lucrative positions in multiple other high-profit areas of tech and is currently trading at a better value than Nvidia. So I'd side with the bulls on this one and say that AMD is an immensely attractive stock right now.