AMD and Intel’s rivalry dates back to the birth of the microchip industry. AMD was always a smaller firm, despite its aggressive growth.
Still, since Lisa Su took the reins at AMD in 2014, the company’s stock has rebounded from penny-stock status and produced returns of almost 30 times during her tenure. Meanwhile, Intel’s stock languished for many years. Still, Intel appears to be staging a comeback of its own in recent months, raising the debate about whether it’s time to consider Intel or if AMD stock is still the superior investment.
The case for AMD
Meanwhile, when Su took the reins of AMD, the PC market was in steep decline. Many investors had given up on AMD because of its stock price, which was trading at less than $5 per share.
Su, on the other hand, shifted AMD’s attention to high-performance computing. She also devised a strategy for catching up to Nvidia and surpassing Intel. As a consequence, AMD has challenged Nvidia in several markets and will release its first 7nm processor in 2019, which Intel has yet to accomplish.
Today, AMD’s enterprise, semi-custom and embedded sector is its growth engine. This includes EPYC processors, server businesses, and gaming console microchips. The computing and graphics segment includes the Radeon and Ryzen GPUs, desktop and notebook CPUs, as well as data center chips. AMD has also acquired a segment focused on the supercomputer market after completing the Xilinx takeover.
The company has enjoyed significant growth in recent years, which is highly unusual for the sector. AMD’s overall profit rose from $532 million to $879 million between 2013 and 2016, an increase of 64%. Revenue was up 7% year over year in Q1. The EESC segment generated 88 percent more revenue. A 33% boost in computing and graphics drove this figure.
Non-GAAP earnings increased by 148% to almost $1.6 billion during the three months, as the firm kept expenses growth below 44%. This increase should continue as the company expects around $26.3 billion in earnings for 2022, 60% more than 2021.
Unfortunately, these hikes have done nothing to prevent AMD stock from declining 40% from its 52-week high. However, the decrease in value helped reduce the P/E ratio to 39, which is far under Nvidia’s 53 P/E ratio. Many investors may regard AMD stock a buy right now when comparing that valuation to revenue growth.
The Intel comeback plan
Intel has been a pioneer in the computer industry for decades, but it has faced management upheaval and the loss of its tech edge. TSMC’s takeover of AMD caused such a stir that Intel began outsourcing production to Taiwan Semiconductor Manufacturing (TSM -0.16%), better known as TSMC.
However, the firm’s strategy changed when the present CEO took over in February 2021. He established Intel Foundry Services, making it a challenge to TSMC and Samsung. To back this business, he has started an aggressive capacity buildup plan that will invest $40 billion in the United States and 80 billion euros in Europe.
Intel CTO Drew Cherry has stated that Brad Linder will continue to be in charge of product development. Although he is currently working on 7nm chips, Intel’s CEO Bob Swan wants to reclaim the technical lead for the company. He aims to produce 7nm chips by 2023 and surpassing TSMC by late 2024. nonetheless, chip creation cycles generally take three to five years. As a result, before investors know if it will succeed in meeting its objectives, Intel has a lot to prove.
Furthermore, such goals might put additional strain on Intel’s struggling finances. Revenue was $18.4 billion in Q1 2022, which is down 7% from the previous year. It also reported non-GAAP net income of $3.6 billion, 35% less than last year’s figure. Profits took a beating as costs rose and earnings fell dramatically short of expectations.
Additionally, since 2022 revenue forecasts of $76 billion imply just a 1% increase in coming years, it will not come as a surprise to investors that the stock price dropped by more than 20% during the last year.
However, Intel’s P/E ratio has fallen to eight, the lowest of the big companies, as a result of these circumstances. If Intel can achieve most of its objectives, it appears poised for a resurgence.
So, Intel or AMD?
AMD appears to be the superior choice right now, owing to current market conditions. AMD is undoubtedly more expensive than Intel, but unlike Intel, it has a lot of potential to boost its prices further.
Still, investors should keep this discussion in mind in the future. Chip development cycles are considerably longer than Gelsinger’s 15-month tenure as Intel CEO, so his approach has yet to be determined. However, if Intel can demonstrate that it is hitting revenue and technological targets, it just might become the semiconductor stock of choice.