Two Stocks Poised to Win Big in Next-Gen AI Chips: Arm and Intel

The CNBC Investing Club, led by renowned financial commentator Jim Cramer, has pointed to Arm Holdings (ARM) and Intel (INTC) as two companies poised for significant gains in the artificial intelligence (AI) chip market. As AI technologies rapidly proliferate, these companies' strategic positions in next-generation AI chips are drawing investor focus.

Arm Holdings has captured attention by unveiling its AGI CPU, specifically designed for AI inference in data centers. The company projects this new product to generate approximately $15 billion in annual revenue by 2031, which is roughly six times its total 2025 revenue. Arm's data center business has been experiencing explosive growth, up more than 100% year-over-year, positioning it to become the company's largest business segment. Announcements of partnerships with key players like Meta, OpenAI, Cloudflare, and SK Telecom further solidify Arm's standing in the AI market.

Intel, on the other hand, has been named Jim Cramer's “favorite stock.” Cramer argues that the market is underappreciating the growing demand for CPUs (Central Processing Units) in AI systems. Intel's significant turnaround under CEO Lip-Bu Tan and its emerging foundry business are seen as having the potential to capitalize on the billions of dollars invested in AI infrastructure. Intel shares have surged over 480% in the past year, demonstrating a remarkable performance.

The semiconductor industry is at the heart of the AI revolution, driving a broad rally across the sector. The iShares Semiconductor ETF's approximately 72% increase this year indicates a new era where hardware is outpacing software. High-performance chips for data centers are becoming indispensable for training and deploying AI models, with companies like Arm and Intel providing essential components for this critical infrastructure.

Cramer emphasized the profound impact of AI on business decision-making, advocating for investors to abandon the outdated software-centric view in technology investment. The rapid adoption of AI is also fueling growth for cloud computing leaders such as Amazon Web Services, Microsoft Azure, and Google Cloud, with overall AI infrastructure spending continuing to rise. Dynamics in the global chip supply chain and increasing geopolitical concerns are prompting companies to seek alternative suppliers beyond Taiwan Semiconductor Manufacturing Co. (TSMC), creating new opportunities for companies like Intel.

Analysts and market observers are closely monitoring the revenue and profit potential of AI-focused companies. For Arm, the success of its AGI CPU in the data center market is crucial for its future growth. For Intel, the re-evaluation of CPUs' role in AI and the development of its foundry business offer potential upside. However, high valuations and intense market competition require investors to exercise caution. The 99% surge in semiconductor stocks in recent months suggests that pullbacks could present buying opportunities.