Intel (NASDAQ: INTC) and AMD (NASDAQ: AMD) were both founded only months apart in the late 1960s — both by employees from Fairchild Semiconductor. Since then, the two companies have been fierce rivals with Intel always coming out ahead until recently with AMD’s introduction of a more powerful chip. Since that time, AMD’s stock price soared and it became the top-performing stock of the S&P 500 in 2018 and 2019. We drill down into the bulls and bears for each company to determine which is the better investment: AMD or Intel?
AMD: bulls vs bears
In the company’s latest quarterly report (Q2, 2021), AMD’s net revenue was up nearly 100%, gross profits increased over 115%, EPS surged over 340%, and net income grew over 350% year-over-year (YoY); moreover, in the same time period, the company’s cash on hand increased by over 110%. Driving all this growth is not only AMD’s client list, which includes high growth giants like Tesla, Microsoft, and Sony, but its technical lead over other chip makers with its 7nm (the lower the nm, the better the chip) Ryzen line.
Intel’s 7nm chip for example, won’t be available until 2023 and by that time AMD will be well into selling its 5nm models. In fact, the company plans to release its 5nm Zen 4 chip in the first half of 2022. All of this translates to greater market share in the microchip industry; as of Q2, AMD’s market share is up over 90% from 2 years ago to 44.1%. For every percentage point AMD gobbles up, Intel loses one. This is evidenced in the highly competitive data server realm in which AMD’s market share has grown nearly 36% YoY thanks to its better performing EPYC 7003 chips.
For all its fireworks, AMD also has associated risks, the main being that its manufacturer, Taiwan Semiconductor Manufacturing Company (TSMC), also services other companies for their chip needs. With a current worldwide chip shortage, who’s to say AMD will get priority? Also, being based in Taiwan poses an additional risk from China, which has aspirations of absorbing the smaller country. Another strike against the company is its drop in GPU market share, which is down 24% YoY.
Intel: bulls vs bears
The global chip shortage and the potential threat of China has prompted the U.S. government to offer subsidies for onshore chip manufacturers. As Intel makes most of its chips in the U.S., it stands to gain a significant capital infusion as a result. Additionally, the company has nearly $6 billion in cash and equivalents on its books and offers a dividend payment of $1.39 per annum (a 5% increase YoY). The company recently unveiled ambitious plans to catch up and overtake AMD’s (and consequently, TSMC’s) chip tech lead by 2025. All these factors suggest that the most popular chip company is here to stay.
Now for the bad news. As per its Q2 2021 report, the company is down across the board save for its EPS, which gained 4% YoY. Its net revenue was down 0.5% and net income dropped almost 1%, while its stock price remained nearly flat in the same time period. The real trouble for the company, however, comes in its lagging tech behind AMD and its time period to catch up. TSMC is also eligible for some U.S. subsidies as it has a plant in Arizona and is already outspending Intel to the tune of $10 billion. And finally, Intel will wait for TSMC to manufacture 3nm chips before making the leap itself, hardly the move of a market leader.
So, which is the better investment right now?
The winner here is obviously underdog AMD. The company makes a more advanced chip, has exclusive rights to the two leading video game consoles, and is gaining momentum in the data-server market. It’s not a question of who will come out ahead in terms of market share but rather when will AMD finally overtake Intel’s crown?
Why not check out our shortlist of stocks that are well-established in their industries but still have the opportunity to give their shareholders unrivaled returns? Start your MyWallSt free trial now.
Contributing Writer at MyWallSt
David fell in love with the stock market in 2000 after making $30,000 overnight on Techniclone. His favorite stocks today are Netflix, Google, Amazon, and Apple as they are the market leaders in their sectors and are safe long-term investments.