AMD vs. Intel: Which Semiconductor Stock is Positioned for a 2025 Rebound?
As we reflect on the tumultuous ride that chip stocks faced in 2024, it’s clear that two titans, Intel (NASDAQ: INTC) and Advanced Micro Devices (AMD), saw their shares negatively impacted. Intel’s stock plummeted approximately 60%, while AMD experienced a comparatively milder decline of about 18%. With the semiconductor landscape increasingly driven by advancements in artificial intelligence (AI), we find ourselves asking: which of these companies is better positioned for a rebound in 2025?
The Current State of the Semiconductor Market
The semiconductor market is rapidly evolving, largely fueled by the AI revolution. Unfortunately, both Intel and AMD have struggled to keep pace with industry leader Nvidia. AMD ranks as a distant No. 2 in the graphics processing unit (GPU) market, and Intel has seen its market share for GPUs dwindle to virtually nil, previously holding just a modest 2% of the PC graphics card market in 2023.
AMD’s Progress Despite Challenges
AMD has contended directly with Nvidia and found itself hindered, primarily due to inferior software offerings. A study by SemiAnalysis highlighted that AMD’s out-of-the-box GPUs were dubbed "unusable" for AI training purposes. However, AMD has managed to establish a niche in AI inference applications, catering to customers who require narrow and well-defined use cases.
Despite these challenges, AMD has made notable strides in its data center segment, reporting a staggering 122% year-over-year surge in revenue to $3.5 billion last quarter. This remarkable growth can be attributed to its Instinct GPUs and EPYC CPUs, highlighting its position as a significant player in emerging technologies.
Furthermore, AMD’s overall revenue climbed 18% to $6.8 billion, with adjusted earnings per share jumping 31% to $0.92. It’s clear that AMD can still demonstrate solid growth even in a rough market environment.
Intel’s Struggles and Future Prospects
In contrast, Intel’s recent performance has not been as encouraging. Last quarter, the company faced a revenue decline of 6% to $13.3 billion, and its adjusted earnings per share shifted to a loss of -$0.46, down from a profit of $0.41 the previous year. The company’s Client Computing segment, which is its largest, saw a revenue drop of 7% to $7.3 billion.
However, Intel’s data center and AI segment did manage a 9% revenue increase to $3.3 billion, showcasing a glimmer of hope amid a challenging landscape. Economically speaking, though, this growth pales in comparison to AMD’s achievements.
Perhaps one of Intel’s most significant woes stems from its Foundry segment, which has consistently underperformed, resulting in a staggering operating loss of $5.8 billion last quarter. While Intel has invested heavily—$68.5 billion in capital expenditures since 2021—generating substantial physical assets, it still struggles to turn a profit. They have even hinted at potentially spinning off their foundry business after the recent exit of CEO Pat Gelsinger.
Analysis and Valuation Insights
From a valuation perspective, Intel appears cheaper, trading at a forward price-to-earnings (P/E) ratio of 12.6 compared to AMD’s 17.6. However, when you factor in Intel’s core business and its problematic foundry operations, the valuation becomes even more interesting.
Intel’s foundry segment might be losing money now, but it boasts significant physical assets worth $104 billion. If you deduct the company’s net debt from its recent capex spending, the foundry business could potentially add around $10 per share. Additionally, owning 88% of Mobileye, estimated at $11.4 billion, equates to roughly $2.66 for each Intel share.
These hidden assets fuel takeover speculation, and with new governmental backing including direct funding and tax incentives, Intel’s situation could shift more positively.
The Road Ahead for Investors
Amidst the turbulence, both Intel and AMD remain compelling turnaround candidates. Personally, I lean slightly towards Intel due to the considerable hidden value in its stock. Nevertheless, AMD is also a promising rebound play, especially considering the increasing demand for its CPU products, which continue to capture market share in both data centers and PC sectors.
Ultimately, investors should recognize the potential in both stocks and consider adding them to their portfolios as feasible options for long-term growth.
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