Intel vs AMD: Which Stock is a Better Buy Today?
Summary
TLDRThis video script explores the investment potential of AMD and Intel, two undervalued semiconductor stocks. It delves into company history, financial metrics, stock performance, and expansion plans. The analysis compares market share, revenue growth, profitability, and innovation, concluding that AMD is a stronger short-term investment due to consistent growth and less financial burden compared to Intel's significant investment in its Foundry division.
Takeaways
- 🤖 AMD and Intel are two major players in the semiconductor industry, often compared for investment potential.
- 🏭 Intel, founded in 1968, is known for creating the first commercial microprocessor and has a diversified business model including client computing, data centers, AI, networking, and a foundry division.
- 💾 AMD, a year younger than Intel, transitioned from memory chips to microprocessors and graphics cards, competing directly with Intel and Nvidia, with business units in data centers, client computing, gaming, and embedded systems.
- 📈 AMD has a higher market cap but lower trailing 12-month revenue compared to Intel, suggesting a potential undervaluation of Intel and overvaluation of AMD based on their price-to-sales ratios.
- 💰 Both companies have shown profitability, but neither stands out in terms of earnings per share, indicating a need for deeper analysis of their financial health.
- 📊 The peg ratio, which considers growth, shows AMD as potentially undervalued compared to Intel, suggesting better growth prospects for AMD.
- 📉 Intel has seen a significant decline in revenue and profit over the past three years, while AMD has shown consistent growth, affecting their market performance.
- 📊 AMD's stock performance has been positive, with a YTD growth of 14.8%, contrasting with Intel's negative 36% YTD performance.
- 🚀 Both companies are investing in growth areas; Intel with their Gaudi 3 accelerator and optical interconnect technology, and AMD with Ryzen chips and Instinct GPUs.
- 💼 Intel's Foundry division is a significant investment with substantial subsidies and loans, aiming to become the second-largest foundry by the end of the decade, but with expected losses for the next few years.
- 📝 The presenter's opinion favors AMD for short-term investment due to consistent growth in key segments and Intel's heavy investment in the foundry business which may delay profitability.
Q & A
Which two companies are discussed in the script as undervalued within the semiconductor space?
-AMD and Intel are the two companies discussed as undervalued within the semiconductor space.
What are the four different points the script plans to cover in comparing AMD and Intel?
-The script plans to cover a company overview and history, financial metrics, stock performance, and expansion plans of AMD and Intel.
How old is Intel and what was its significant achievement in 1971?
-Intel is over 56 years old and created the world's first commercial microprocessor in 1971.
What are the five major areas of Intel's business?
-Intel's five major areas of business are the Client Computing Group, Data Center and AI Group, NEX or Networking and Edge Group, and the Foundry division.
How old is AMD and what was its initial focus before shifting to microprocessors and graphics cards?
-AMD is 55 years old and initially focused on making memory chips before shifting to microprocessors and graphics cards in the 90s.
What are the four business units of AMD mentioned in the script?
-AMD's four business units are the data center business, client section, gaming segment, and embedded business.
What does the script suggest about the market cap of AMD compared to Intel?
-The script suggests that AMD has a market cap nearly twice that of Intel.
What is the significance of the price to sales ratio in evaluating the potential undervaluation of a stock?
-The price to sales ratio indicates the value investors are willing to pay for each dollar of a company's sales. A lower ratio compared to the industry average may suggest a stock is undervalued.
How does the script describe the peg ratio and its relevance to investment decisions?
-The peg ratio, or price to earnings to growth ratio, is used to determine if a stock is undervalued based on estimated growth. A lower peg ratio indicates potential undervaluation.
What is the script's opinion on AMD's growth potential in the data center and client business segments?
-The script suggests that AMD has consistently been growing in its data center and client business segments and is expected to continue growing in the short term.
What challenges does Intel face according to the script, especially regarding its Foundry division?
-The script mentions that Intel faces challenges with massive investments in its Foundry division, which makes up nearly one third of its revenue and won't be profit neutral for another three to four years.
What is the script's final opinion on which stock might be a better investment between AMD and Intel?
-The script's final opinion is that AMD might be a better investment in the short term due to its consistent growth, while Intel might experience significant growth around 2027.
Outlines
🤖 Stock Comparison: AMD vs. Intel
The script introduces a comparison between AMD and Intel, two major players in the semiconductor industry, focusing on their potential as investments. It outlines a plan to evaluate the companies through company history, financial metrics, stock performance, and expansion plans. Intel's long-standing dominance and diversification into various business units like client computing, data centers, AI, networking, and the foundry division are highlighted, alongside AMD's transition from memory chips to microprocessors and graphics cards, and their business units including data centers, client computing, gaming, and embedded systems.
📊 Financial Analysis of AMD and Intel
This paragraph delves into the financial metrics of AMD and Intel, revealing AMD's higher market cap contrasted with Intel's superior revenue. The discussion covers price-to-sales ratios, indicating potential undervaluation for Intel and overvaluation for AMD, and compares gross profits and earnings per share. The script also examines the peg ratio, which suggests AMD may be undervalued based on growth estimates. Historical financial data from three years prior is contrasted with the present, showing AMD's consistent growth and Intel's decline in revenue and profit. The paragraph concludes with an analysis of the trailing five quarters for each company's business units, noting Intel's mixed performance and AMD's growth in data center and client segments.
📈 Stock Performance and Future Growth Strategies
The script contrasts the stock performance of AMD and Intel, with AMD showing significant growth over various timeframes and Intel demonstrating a prolonged downward trend. It then transitions into discussing each company's expansion plans. Intel's introduction of the Gaudi 3 accelerator and advancements in optical interconnect technology are highlighted, alongside their substantial investment in the foundry business, including new facilities and job creation. The potential impact of these investments on profitability and the company's future growth is considered. AMD's recent achievements in consumer and data center GPUs are mentioned, along with rumors of a massive supercomputer project, suggesting a promising future for the company.
💭 Personal Opinion on AMD and Intel Stocks
The final paragraph presents the author's personal opinion on the stock investment potential of AMD and Intel. Despite both companies being undervalued, the author favors AMD for the short term due to its consistent growth in key business segments and perceives Intel's significant investment in the foundry division as a risk with a delayed return. The author predicts significant growth for AMD in the next few years, while Intel's growth is anticipated to take off around 2027. The script ends with an acknowledgment of differing opinions and an invitation for viewer feedback on the comparison.
Mindmap
Keywords
💡Undervalued Stocks
💡Semiconductor
💡Financial Metrics
💡Market Share
💡Microprocessor
💡Business Units
💡Gross Profit
💡P/E Ratio
💡Stock Performance
💡Expansion Plans
💡Innovation
Highlights
AMD and Intel are two of the most undervalued stocks within the semiconductor space.
Comparison will cover company overview, financial metrics, stock performance, and expansion plans.
Intel is over 56 years old and created the world's first commercial microprocessor in 1971.
Intel maintained 68% market share in microprocessors in 2023.
Intel operates in five major areas: Client Computing Group, Data Center and AI Group, Networking and Edge Group, Accelerated Computing Systems and Graphics Group, and Foundry Services.
AMD is 55 years old and competes in memory chips, microprocessors, and graphics cards.
AMD's business units include Data Center, Client, Gaming, and Embedded.
Intel's Foundry division, formed in Q1 2024, aims to offer chip manufacturing for Intel and external customers.
AMD's data center business revolves around its Epic processors and Instinct accelerators, competing directly with Intel's Xeon processors.
AMD has been consistently growing in revenue and profit, but its earnings per share took a major dive.
Intel's revenue dropped by 30% and profit by 47% since the same quarter in 2021.
AMD's stock performance has consistently shown growth, whereas Intel's has been on a downward trajectory.
Intel's Gaudi 3 accelerator promises significant improvements over Nvidia's H100, but Nvidia's Blackwell Superchips may surpass it.
Intel's optical interconnect technology offers four terabytes of bandwidth, but its commercialization timeline is unclear.
AMD's Ryzen chips outperform Intel's Core i9 and i7 chips according to benchmarks from Tom's Hardware.
AMD's data center GPUs, like the Instinct Mi325X, theoretically beat Nvidia's H200 Blackwell in memory capacity and bandwidth.
AMD is rumored to be building a supercomputer with 1.2 million GPUs, significantly more than current supercomputers.
Intel's Foundry division is a major investment, creating 10,000 jobs but will take years to become profitable.
AMD is viewed as a better short-term investment due to consistent growth in data center and client business.
Intel may see significant growth around 2027 after overcoming Foundry business debt.
Transcripts
In the area of technology and artificial intelligence, AMD and Intel are two of the
most undervalued stocks within the semiconductor space. But which one is a better investment? And
how do they stack up against one another? I plan to break it down by comparing and covering these
four different points. I'll start by providing a company overview and some history of both AMD
and Intel. Next is the financial metrics. We'll dive into the typical suspects within financial
metrics such as the PDE ratios, revenue growth, and of course their profitability.
Then I'll move on to the stock performance. We'll look at how each company's stock has
performed over the past few years and what their current market sentiment looks like today. The
next will be their expansion plans where I'll compare a few of the different highlights that
are regarding their products and their innovations to see who is leading in terms of technology and
their market adoption. Now I can't cover every single detail, but I'll at least try to touch on
the areas that are impacting the stock over the next few years. And then I'll finish it off with
my opinion on which stock I see as a better option today and which one may be better in a
year or two. Seeing as how Intel is over 56 years old and they created the world's first commercial
microprocessor in 1971, they deserve to have their story told first. Interestingly enough, in the 80s
they focused primarily on memory chips and then they shifted in the 90s to microprocessors for
computers with their flagship product being the Pentium processors. They were tied so closely
with Microsoft and they were often referred to as Windtel. At that time, Intel maintained over 85%
market share in the 32-bit microprocessors. And in 2023, Intel maintained 68% market share in the
microprocessor area. And these client computing group products are its bread and butter for its
everyday business. Intel operates in five major areas of their business and they are client
computing group, which is mostly their Intel core processors and the chipsets for computers and
graphics. Next is their data center and AI group, which consists of their Xeon processors, GPUs,
Agati AI accelerators, and Intel's Optane Memory. And their next group is NEX or the Networking and
Edge Group. And they represent Intel's efforts to capitalize on the growing importance of edge
computing, 5G networks, and the increasing demand for flexible programmable network infrastructure.
And their last group is the Foundry division that was formed as its own P&L starting in Q1 of 2024,
where the goal is to offer chip manufacturing within their Foundry for both Intel and external
customers. This opens up a broad growth channel to compete with other Foundries like Taiwan
Semiconductor. And these happen to be the five core businesses that we'll be speaking to within
the financials. But for now, let's cover AMD, where they have a very similar story to Intel, but
AMD happens to be exactly one year younger at 55 years old. They began with making memory chips in
the 70s and the 80s. And then they shifted in the 90s to compete against Intel in microprocessors,
and also against Nvidia with their graphics cards, where AMD was the brand that was offering value
for performance. As for their business units, they have four that I'll be speaking to, where
their first is their data center business that revolves around its Epic processors and Instinct
accelerators or GPUs. The Epic processors are in direct competition with Intel's Xeon processors,
and their Mi 300 series GPUs are in direct competition with Nvidia's infamous H100s.
Their next business group is the client section that's very similar to Intel, where they focus on
their Ryzen computer processors for home computers and laptops. And their third group is the gaming
segment responsible for the Radeon graphics cards or discrete GPUs for consumer use. And AMD's last
group is their embedded business that is very similar to Intel's networking and edge group,
where AMD offers an array of processors and chips to be used in industrial and commercial
applications, such as healthcare and automotive. And as you look at the groups for each company,
there is a lot of overlap between the two. One of the few areas that is unique is that Intel
has its own foundry and in some ways can control their own destiny for their product or become
contract work for all the other chip designers. Now, I love focusing on personal finance,
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extra $100 discount with the code that's listed right here or down in the description. Now let's
shift gears a little bit and begin to look at the financial metrics between the two companies,
where AMD has a market cap at nearly $260 billion, which is twice that of Intel. But when we look at
the trailing 12 month revenue, things get a little bit interesting, where Intel's $55 billion is
nearly twice that of AMD's $22.8 billion. So what exactly does that tell us? Well, it indicates that
Intel is potentially undervalued, or possibly that AMD is overvalued as a comparison of their
price to sales ratio, where AMD sits at over an 11 and Intel has a price to sales ratio of 2.34.
And as a quick reference, Nvidia has a price to sales ratio of 37.9, which is extremely high. And
to level set them all, the average price to sales ratio for the semiconductor industry is at a 4.49,
which leans more heavily into the form of thinking that Intel is certainly the most undervalued of
the group at a 2.34 ratio. Now going a step further, the gross profit for Intel is twice
that of AMD's, but despite that, the earnings per share is equally low for both companies. Neither
one of them is winning in the earnings per share department. To add a little bit of clarity, let's
look at the peg ratio, or the price to earnings to growth ratio. And as a quick refresher, this
ratio is best with a lower number to indicate an undervalued situation. This is because it uses the
future growth as the denominator in the equation. So the higher the growth, the lower the overall
number. This happens to be one of the key items that I look for within all of my investments. It
isn't perfect, but it is just another data point that I use within making my decisions. And when
looking at the peg ratio for these two, AMD is substantially smaller than Intel, and this may
indicate an undervalued situation based on the estimated growth. And keep in mind that all of
these attributes can change a great deal from quarter to quarter. And in researching this,
I thought it might be good to compare some of these attributes from three years ago during
the same quarter. And one thing you'll notice is that AMD's revenue and profit consistently grew,
but the earnings per share took a major dive, and the P to E ratio was much higher three years
ago at 143. And when we do the same comparison for Intel, it's not as good a story. Most every single
attribute has declined compared to three years ago. In fact, its revenue has dropped by 30%,
and its profit dropped by 47% since the same quarter in 2021. Which makes this a very good
time to transition to the trailing five quarters for each business unit within each company,
where we'll start with Intel. For Q1 of this year, the shining star is the Client Computing Group,
which is the retail processors, and it happens to be up 31%. But that's due in part because of the
Q1 of 2023, it had dropped by -38% from 2022. So yes, it's showing year over year growth right now,
but it is a big drop from the $9.3 billion in 2022 for Q1. And the data center and AI group is up 5%,
but it is half the sales that it had in 2022 at $6 billion. And one outlier for Intel is
the Foundry division, where they manufacture chips for themselves and other companies. It was showing
decent growth from right to left, looking at Q1 of 2023 at $118 million, to the $291 million in Q4 of
2023. But in 2024, they restructured that group and they rolled a lot into it where it is now at
$4.4 billion in Q1 of 2024, but with a major loss year over year at a negative 10%. In looking at
these quarterly trends, one may conclude that Intel has finally reached bottom and is slowly
beginning to grow back out. But with the Foundry division making up such a large chunk of their
revenue and being restructured, it's really cloudy and it's difficult to understand where
it's heading. Now let's look at AMD's business unit quarterly trends, where its data center
revenue had been flat for a few quarters back to back, and then had massive growth in Q4 of 2023
at $2.3 billion, and also in Q1 of 2024 at $2.3 billion. And this is a similar story for their
client business, but in the areas of gaming and embedded, the businesses drop significantly each
quarter. And I haven't heard enough from AMD to say if either their embedded or gaming divisions
are on track for any major growth. For now, I expect the majority of AMD's growth to be coming
from their data center and their client areas. Now I'll briefly go over the stock performance,
and then I'm going to transition into the plans for expansion and growth. And I'll
finish it of course, with my opinion on these two companies. In looking at the year to date,
AMD's 14.8% is a huge gap from Intel's negative 36%. And sadly, that is the case in looking at
all the different timeframes. Where I want to showcase this graph over the past five years of
stock growth for AMD. For starters, it's all green where there's been consistent growth, where AMD
has been able to nibble away at share from both Intel and Nvidia. And as a major contrast, here's
the five-year graph of Intel. And for any of you that are out there that happen to be colorblind,
this graph is completely red. Where Intel has been on a downward trajectory for quite some time. But
is it at the bottom and just now starting to come back up? Hmm. Well, let's move on to how
each company is planning for their expansion and growth. Where Intel debuted earlier this year,
their Gaudi 3 accelerator, promising 50% on average better inference and 40% on average
better power efficiency than Nvidia's H100 at a fraction of the cost. In fact, some news articles
tout Gaudi 3 will cost about half as much as Nvidia's H100. But this also comes at a time when
Nvidia is launching their Blackwell Superchips, the tout being four times faster and 25 times
more efficient than those H100s. Soon enough, we'll see if customers want a slight improvement
with Intel's option at major cost savings, or do companies simply want the top performance
regardless of the cost? Clearly, I don't have the answer, but at a time where everyone is looking to
build out the best AI models, performance might not be more important than cost savings because
the reality is it's a race. Now there does happen to be one bit of cool news coming from Intel with
our recent announcement on optical interconnect technology that's meant to be a major step up
for motherboards and peripherals with four terabytes of bandwidth, which is truly light
years from where we are today. But the question that they haven't answered is the timing for the
commercialization and adoption of this product. It may be years before we see this in the market. Now
another definite area for growth for Intel is in its Foundry division, where they've secured
over eight and a half billion in Chipsack subsidies, and they're taking on $11 billion
worth of loans. Adding to that, they're also looking to secure even more funding because hey,
big surprise, Foundries are very expensive. And they happen to be building plants in Arizona,
Ohio, New Mexico, and Oregon, creating over 10,000 jobs. This is a lot of debt for these facilities,
and it's going to take years to become operational and definitely years to become profitable. Intel's
own CEO made the statement that 2024 is a trough for Foundry losses, and they'll become the number
two Foundry by the end of the decade. And between now and then, we'll hit break even operating
margin midway. Now this is extremely important to understand. The Foundry business happens to
be about one third of their revenue today, and it will be bringing down profit for the next three
to four years. This is a key item to understand, and most institutional investors already recognize
this. Now let's move on and discuss what AMD has going for it. And let's start with this
chart showing benchmarks from Tom's Hardware, where AMD is taking the top spot with its Ryzen
chips compared to Intel's Core i9 and i7 chips. Granted, Intel has new Arrow Lake chips coming
out later this fall, but for the consumer market, this will probably give AMD more share from Intel,
at least in the short term. And from this chart, you can see that AMD has been slowly gaining share
in the red over Intel in the blue over the past eight years, where AMD has been making steady
gains over that time. And when we look at data center GPUs, AMD is touting the Instinct Mi325X
that theoretically beats Nvidia's H200 Blackwell in memory capacity and bandwidth. But it won't
arrive until Q4 of this year, so I'm not going to get into too many details until it's a reality.
But it could play out favorably for the company's growth, but not until 2025. And most recently,
AMD has stirred the rumor mill by sharing that a customer is looking to build out a 1.2 million GPU
supercomputer, which is completely insane seeing as how the current supercomputers have less than
50,000 GPUs. Now let's move on to my opinion about Intel versus AMD, and which one may be a
better stock to buy. Honestly, both companies are undervalued, and they're both going to be great
investments over the long term. When it comes to the financials and the future expansions, for my
money, I see AMD as a much better investment at least in the short term. They have consistently
been growing in its top segments of data center and client business most every single quarter. And
Intel has had the opposite story, where it's been declining quarter over quarter, but slowly inching
up when you look at it year over year. Plus, Intel has those massive investments in the Foundries,
which makes up nearly one third of its revenue, that won't even be profit neutral for another
three to four years. And yes, it's true that its data center and client group have great potential,
but they have a lot of headwind in competition and also overcoming all of that debt from the
Foundries division. Based on the information that we reviewed, I'm banking on AMD growing
quite well for the next three to four years, based on this current information that's available. And
depending on how Intel manages its Foundry business, then I think Intel should be ready
to blow up with growth around 2027. And I know that there are a ton of Intel fans out there
that aren't going to like my point of view. And that's okay, this is merely my opinion. And as
I mentioned, Intel is the most undervalued stock of the two, and I could be completely wrong where
their stock could blow up any day. But funny enough, I had a viewer provide their point of
view about Intel that really stuck with me. And he said, Intel is like keeping a dead goldfish.
And that comment becomes more profound the more that I think about it. Feel free to let me know
in the comments if you completely disagree with my opinion. I'd love to hear what others think. And
please let me know if you want me to compare any other companies. Thank you so much for watching.
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