While several chip stocks had convincing performances in 2024, Intel(NASDAQ: INTC) and Advanced Micro Devices(NASDAQ: AMD) weren’t amongst them. Intel shares fell about 60% last 12 months, while AMD shares were down about 18%.
Let’s examine which semiconductor stock looks just like the higher rebound candidate in 2025.
In a semiconductor market largely being driven by artificial intelligence (AI), Intel and AMD have largely been afterthoughts. AMD is the distant No. 2 designer of graphic processing units (GPUs) behind market leader Nvidia. Intel’s market share in GPUs, meanwhile, has dropped to zero, even though it wasn’t a far fall, with the corporate having only a 2% market share in PC graphics cards in 2023.
AMD has struggled against Nvidia, largely as a consequence of its inferior software. In a recent study, SemiAnalysis called AMD’s out-of-the-box GPUs “unusable” for AI training, noting it needed “multiple teams of AMD engineers” to assist it fix software bugs. Nonetheless, AMD has been in a position to carve out a distinct segment in AI inference, with SemiAnalysis saying its customers typically use AMD’s GPUs for narrow, well-defined inference use cases.
Nonetheless, AMD has been in a position to see strong data center growth, albeit not nearly at the identical scale as Nvidia. Last quarter, it saw its data center revenue surge 122% 12 months over 12 months and 25% sequentially to $3.5 billion. The corporate credited each its Instinct GPUs and EPYC central processing units (CPUs) for the jump in sales.
CPUs act because the brain of a pc, while GPUs have superior processing power. While there’s quite a lot of deserved attention on GPUs, AMD has been doing an excellent jump within the CPU market, noting that it has been taking share within the CPU server market while it also has been doing well within the PC market.
Overall, AMD saw its Q3 revenue climb 18% to $6.8 billion and its adjusted EPS jump 31% to $0.92. So the corporate has still been growing nicely despite the dip in its stock price.
Intel, however, saw its revenue decline last quarter by 6% to $13.3 billion, and its adjusted EPS flip to a lack of -$0.46 versus a profit of $0.41 a 12 months ago. The one brilliant spot last quarter was its data center and AI segment, which saw revenue rise 9% to $3.3 billion. Nonetheless, compared to Nvidia and AMD, that could be a very modest gain on this segment.
Meanwhile, its largest segment, Client Computing, saw its revenue drop 7% to $7.3 billion. By comparison, AMD saw its Client segment revenue surge 29% last quarter to $1.9 billion, showing it’s making some inroads on Intel’s primary PC business.
Perhaps Intel’s biggest woes, though, stem from its Foundry segment, which has been an enormous drag on its results. The corporate has poured money into this business through capital expenditures (capex), constructing out latest manufacturing facilities. Nonetheless, the segment has been a consistently large money loser, including reporting a $5.8 billion operating loss last quarter, or $2.7 billion when excluding a noncash impairment charge.
Following the exit of its CEO Pat Gelsinger, Intel has said it could look to spin off its foundry business. The business recently received $7.86 billion in direct funding and a 25% investment tax credit from the federal government to proceed to construct out its manufacturing footprint within the U.S.
From a valuation perspective, Intel is the cheaper stock, trading at a forward price-to-earnings ratio (P/E) of 12.6 times versus 17.6 times for AMD.
Nonetheless, in case you individually value Intel’s core business and its foundry business, its valuation is much more attractive.
Intel’s foundry business has been losing numerous money, nevertheless it also has quite a lot of physical assets. Intel has spent $68.5 billion in capex, totally on the foundry business, because the end of 2021 and has $104 billion in physical assets on its balance sheet. When you take just its recent capex spending and subtract out its $26 billion in net debt, its foundry business could be value about $10 per share on 4.3 billion in shares. It also owns an 88% stake in Mobileye, which is value about $11.4 billion, or $2.66 per Intel share.
As such, it is not any surprise that the corporate has been the topic of takeover rumors. There are quite a lot of hidden physical assets not reflected in its share price, not to say the federal government’s direct funding and tax incentive.
AMD, meanwhile, has definitely been the stronger of the 2 businesses, even though it hasn’t gotten the investor respect it could deserve. If more AI infrastructure turns toward AI inference, it might be in an excellent place. Meanwhile, investors shouldn’t overlook its CPU business, which has been gaining share each in data centers and PCs.
I like each stock as turnaround candidates this 12 months. I like Intel barely more due to the deep value I feel continues to be within the stock. Nonetheless, AMD also looks like a solid rebound candidate. Fortunately, investors do not have to decide on and may add each stocks to their portfolios in the event that they select.
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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Advanced Micro Devices, Intel, and Nvidia. The Motley Idiot recommends the next options: short February 2025 $27 calls on Intel. The Motley Idiot has a disclosure policy.