Intel vs AMD: Which Stock is a Better Buy Today?

Summary

This 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

00:00

🤖 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.

05:01

📊 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.

10:04

📈 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.

15:06

💭 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.

Keywords

💡Undervalued Stocks

Undervalued stocks refer to shares in the market that are believed to be trading for less than their true worth or potential. In the context of the video, AMD and Intel are described as undervalued within the semiconductor industry, suggesting that they may be good investment opportunities as their market prices do not fully reflect their underlying value or future growth potential.

💡Semiconductor

A semiconductor is a material that has electrical conductivity between that of a conductor and an insulator. The term is central to the video's theme as both AMD and Intel are major players in the semiconductor industry, focusing on the production of microprocessors and other chips that are integral to modern electronics.

💡Financial Metrics

Financial metrics are quantitative indicators used to assess a company's financial performance or position. The script delves into various financial metrics such as P/E ratios, revenue growth, and profitability to compare AMD and Intel's financial health and investment potential.

💡Market Share

Market share represents the percentage of an industry's total sales that a company controls. The video discusses Intel's historical dominance with over 85% market share in 32-bit microprocessors, and its current market share in the microprocessor area, illustrating the company's competitive position over time.

💡Microprocessor

A microprocessor is a tiny chip that functions as the central processing unit of a computer. The script provides a historical overview of Intel's and AMD's involvement in microprocessor development, highlighting their significance in the evolution of computing technology.

💡Business Units

Business units are distinct segments of a company that function as separate entities, often focusing on specific product lines or market sectors. The video outlines the different business units of AMD and Intel, such as Intel's Client Computing Group and AMD's Data Center Business, to demonstrate their areas of operation and potential for growth.

💡Gross Profit

Gross profit is the profit a company makes after deducting the costs associated with making and selling its products, but before deducting other overheads. The script compares the gross profit of Intel and AMD to evaluate their financial performance and efficiency in generating profit from their sales.

💡P/E Ratio

The price-to-earnings (P/E) ratio is a valuation ratio calculated by dividing the market value per share of a stock by its earnings per share. It is used in the script to compare the valuation of AMD and Intel, with a lower P/E ratio suggesting that a stock may be undervalued relative to its earnings.

💡Stock Performance

Stock performance refers to the change in the price of a stock over a period of time, reflecting its historical returns and market sentiment. The video analyzes the stock performance of AMD and Intel over the past few years to assess their investment appeal and current market perception.

💡Expansion Plans

Expansion plans are strategies or initiatives a company undertakes to grow its business, often through new products, markets, or technologies. The script discusses the expansion plans of AMD and Intel, such as Intel's Foundry division and AMD's data center GPUs, to evaluate their potential for future growth and innovation.

💡Innovation

Innovation refers to the introduction of new methods, ideas, or products. The video touches on the innovations of both companies, such as Intel's Gaudi 3 accelerator and AMD's Ryzen chips, as a key factor in their competitive positioning and future success in the technology market.

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,  

and in my first video I explained the importance  of walking away from the corporate lifestyle and  

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spin class. Yes, the bike is a great price at $499  for a limited time, and my viewers can also get an  

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.