During the top of the dot-com bubble back in 2000, Intel’s market cap was over $500 billion. At this time, its rival AMD was only valued at $12 billion.
But today Intel has a cap of only $215 billion, and AMD is now $130 billion. Let’s see why Intel’s value went down and AMD’s went up, and whether or not AMD might eclipse Intel by the year 2025.
How Intel lost its top-dog status
Intel was valued at almost 50 times its 2020 earnings at its peak decades ago. Today, the stock is at around 12 times forward earnings, compared to AMD’s 35 p/e ration.
Investor’s enthusiasm for the company has waned as it lost the CPU market to AMD in the early 2000s. However, AMD continued its resources too thinly after it went into the GPU market with its purchase of ATI in 2006, and it struggled to fight against Intel and Nvidia across two different fronts.
But over the previous five years, the tables have turned. Intel has struggled to keep its two-year “tick-tock” cycle of shrinking CPUs and then refining them, and its foundry was overcome by TSMC in the “CPU process race” to create smaller and better chips. It repeatedly dealt with shortages and delays, and frustrated OEMs went to AMD.
AMD eventually switched their CPU manufacturing to TSMC’s more advanced process. That choice allowed AMD to create more advanced CPUs than Intel, while giving a stable supply of GPUs and CPUs to OEMs.
Because of this good move, AMD had 39.8% of the global CPU sales in Q3 of 2021, according to PassMark, while Intel had a 60% marketshare. That shocking reversal caused AMD’s revenue growth to beat Intel’s by a huge margin over the previous five years:
Will AMD overtake Intel by 2025
Analysts believe AMD will grow faster than Intel over the next couple of years.
We should take these estimates with a grain of salt, but they reflect the power of AMD’s GPU and CPU businesses, its good sales of custom APUs for video gaming consoles, and Intel’s market share declines across the laptop, desktop and server markets. Intel’s earnings will also possibly decline as it increases its domestic foundries and creates new chips.
It is hard to tell what will occur after 2022. Intel could miss its targets, resulting in greater market share going to AMD, or it might fulfill its goals and hit back against AMD with better chips.
If Intel messes up and its growth stagnates going into 2025, there is a strong chance AMD’s growth will go faster, its stock will then double, and its market cap will go past Intel’s. But if Intel does turnaround, its stock might rally and make it a lot more valuable than AMD yet again.
Author: Steven Sinclaire