The past few years have been difficult -- to say the least -- for Intel (INTC -2.34%). Competitors like Nvidia have seen their share prices balloon thanks to the rapid rise of AI technologies. Yet, Intel shares have lost nearly a third of their value over the past 12 months alone.

If you've been looking for an undervalued AI stock, this could be your chance. Intel stock has some important advantages right now, but you'll also want to be wary of some risks. Overall, however, shares could have massive upside potential as a turnaround story.

Intel stock is priced at a steep discount to Nvidia

On the surface, Intel and Nvidia have a lot in common. Both manufacture graphics processing units (GPUs) -- critical components that make modern computing possible, including most machine learning and artificial intelligence tasks. Yet Intel shares are noticeably cheaper, with the company garnering a much smaller market cap. Intel's profitability, meanwhile, is significantly lower.

Why is Intel priced at such a discount to Nvidia? There are many reasons, but the biggest is that Nvidia was more prepared for the AI revolution than Intel.

NVDA PS Ratio data by YCharts.

Bloomberg News calls Nvidia's GPUs the "workhorse for training AI models" for a good reason. Nvidia invested in specialized chips designed for artificial intelligence and machine learning applications early. Its CUDA developer suite, launched in 2006, has been allowing developers to customize its chips to create unparalleled performance advantages while also locking them into Nvidia's ecosystem.

The result has been superior products that customers are reluctant to abandon, giving Nvidia a 70% to 95% market share for most market segments related to AI, like data centers.

Due to a lack of foresight and some strategic mistakes, Intel has been left in the dust. Its GPUs can't match Nvidia's performance, and its developer ecosystem is similarly inferior. But are shares cheap enough to bet on a turnaround? Previous chip wars have seen losers become winners over time. Could the same be true for Intel?

Image source: Getty Images.

Should you bet on INTC over NVDA?

Intel won't compete in a meaningful way with Nvidia when it comes to AI GPUs anytime soon. "This is not a quick fix," Intel's incoming CEO announced earlier this month. The company's research and development budget is still higher right now, but Nvidia is quickly catching up.

Given its size, expect Nvidia's innovation budget to surpass Intel's within a year or two. Still, Nvidia's is outcompeting when it comes to creating next-gen AI chips. Its Blackwell architecture, for example, had a 12-month waiting period earlier this year due to excess demand. Its developer suite -- in use for nearly two decades -- will continue to keep developers locked into its ecosystem.

If AI spending takes off like it's expected to, however, there will be plenty of room for multiple winners. Intel is investing aggressively in new, higher-performance chips. It's also investing heavily to expand its software suite. Due to industry supply challenges, it also has the opportunity to compete on price, even if its total offerings remain relatively weak compared to Nvidia.

Is Intel a worthwhile turnaround bet? It's tough to say. The company is struggling to remain profitable in today's competitive environment, with sales growth expected to be negative for the year to come. With a market capitalization of under $100 billion versus Nvidia's market cap of more than $3 trillion, however, the upside potential is clear. But only investors willing to take on a very long holding period for a high-risk, high-reward stock should consider jumping in.