Look out, Intel (NASDAQ:INTC)! AMD (NYSE:AMD) is back in action. The upstart chipmaker's much-vaunted Shanghai chip hit the street this week, months ahead of schedule. The Intel-AMD chip war has been running pretty cool lately, but things just heated up again.

The Shanghai models are made on an advanced 45-nanometer manufacturing process, which should make AMD's Foundry spinoff attractive to other semiconductor designers. That technology, developed in concert with IBM (NYSE:IBM), lets chips run faster and cooler than older, bulkier electrical traces. (To put the term "bulky" into perspective, you could fit about 800 lines of 65nm processor design lines side-by-side across an average human hair.)

The Shanghai core does more than merely shrink the chip traces. Both Microsoft (NASDAQ:MSFT) and VMware (NYSE:VMW) should appreciate new virtualization features, which reduce the time lost when switching the processor's attention from one virtual machine to another. Hardware review site AnandTech says that “when it comes to power, AMD is still leading this space by a significant margin.” That's music to data-center managers' ears.

And like I said, all of this progress worked itself through AMD's design and implementation systems in record time, thanks to great manufacturing yields right off the bat, and what looks like a much tighter management team than the one that botched last year's Barcelona launch.

No product launch happens in a vacuum, especially in this tightly contested processor market. Intel is about to launch its own next-generation chip, with virtualization improvements and power-saving features of its own. And the computer market softened very quickly when the world's financial institutions took a sudden nosedive. AMD is supposed to give us a mid-quarter sales update in early December -- but so was Intel, until it moved that event up to last week.

That said, AMD remains a ridiculously cheap stock, and with its manufacturing division spun off, its balance sheet will look much stronger the next time we see it. The company can focus on great chip design, driving thorns in the sides of Intel and NVIDIA (NASDAQ:NVDA). According to Yahoo! Finance, the average analyst's one-year price target appears to be around $6 per share today, which would be an instant double once the market comes to its senses. I bought my shares at $23, and I see no reason why I shouldn't reap a profit in a few years. This stock is for long-term investors, not short-term gamblers.

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Microsoft and Intel are Motley Fool Inside Value selections. VMware is a Motley Fool Rule Breakers pick, NVIDIA is a Motley Fool Stock Advisor recommendation, and The Fool owns shares and covered calls of Intel. Try any of our Foolish newsletters services free for 30 days.

Fool contributor Anders Bylund owns shares in AMD, but he holds no other position in any of the companies discussed here. You can check out Anders' holdings or a concise bio, if you like. The Motley Fool is investors writing for investors.