2024 was a tough year for many semiconductor stocks, including Intel (NASDAQ:INTC) and AMD (NASDAQ:AMD). Intel saw its shares tumble by nearly 60%, while AMD experienced an 18% drop. As we look ahead to 2025, let’s evaluate which of these two companies stands out as the better rebound candidate.
The Role of AI in the Semiconductor Market
The semiconductor industry has been significantly influenced by advancements in artificial intelligence (AI), with Nvidia leading the charge. Both Intel and AMD have struggled to capture meaningful market share in this area.
- AMD’s Position: AMD holds the second position in the GPU market, far behind Nvidia. Despite this, AMD has made strides in specific AI inference use cases, where its GPUs are used for defined, narrow tasks. However, AMD has faced challenges due to inferior software performance, as highlighted by reports citing usability issues in AI training.
- Intel’s Decline: Intel’s presence in the GPU market has dwindled to nearly zero. By the end of 2023, its market share in PC graphics cards was just 2%, and it exited the space entirely.
AMD: Growth in Data Centers and CPUs
While AMD lags behind Nvidia in the GPU market, it has found success in the data center and CPU markets.
- Data Center Revenue Growth:
In the most recent quarter, AMD’s data center revenue surged 122% year-over-year and 25% sequentially, reaching $3.5 billion. This growth was driven by its Instinct GPUs and EPYC CPUs. - CPU Market Success:
AMD’s CPUs, which act as the “brain” of computers, have gained significant traction. It has been steadily increasing its market share in both the PC and server segments. For Q3 2024, AMD reported:- Total revenue up 18% year-over-year to $6.8 billion.
- Adjusted earnings per share (EPS) rose 31% to $0.92.
Intel: Challenges and Opportunities
Intel has faced a tough road, with declining revenues and profitability.
- Financial Performance:
In the latest quarter, Intel’s total revenue dropped 6% to $13.3 billion, and its adjusted EPS turned negative at -$0.46, compared to a profit of $0.41 a year earlier. - Bright Spot – Data Centers and AI:
Intel’s data center and AI segment showed modest growth, with revenue up 9% to $3.3 billion. However, this growth pales in comparison to the gains achieved by Nvidia and AMD. - Foundry Segment Woes:
Intel’s foundry business has been a significant drag on its financial performance. The company reported:- A $5.8 billion operating loss in this segment last quarter.
- Heavy capital expenditures (Capex) to build new manufacturing facilities.
Intel is exploring the option of spinning off its foundry business, which recently received $7.86 billion in direct funding and a 25% investment tax credit from the U.S. government.
Valuations and Investment Verdict
From a valuation perspective:
- Intel trades at a forward price-to-earnings (P/E) ratio of 12.6x, making it appear cheaper than AMD.
- AMD trades at a higher P/E ratio of 17.6x, reflecting its stronger growth potential.
Intel’s Hidden Value:
Intel’s foundry business, while unprofitable, has significant physical assets worth approximately $104 billion. When accounting for its recent Capex investments and subtracting net debt, the foundry could be worth around $10 per share. Intel also owns an 88% stake in Mobileye, valued at approximately $11.4 billion. These factors make Intel an intriguing value play.
AMD’s Growth Potential:
AMD’s strong position in the data center and CPU markets, along with its niche in AI inference, makes it a solid growth candidate. If the AI infrastructure market shifts more towards AI inference, AMD could benefit significantly.
Final Thoughts: AMD or Intel?
- Intel offers deep value, with its hidden physical assets and potential foundry spinoff making it attractive for value investors.
- AMD presents strong growth prospects, particularly in data centers, CPUs, and AI inference applications.
For investors, both stocks offer unique opportunities in 2025. Diversifying by including both AMD and Intel in a portfolio could be a smart strategy to balance value and growth.
Disclaimer: This article is for informational purposes only and should not be considered financial advice. Always consult a financial advisor before making investment decisions.