AMD vs. Intel Stock: Better Semiconductor Turnaround Candidate

On January 27, 2025By Littum

While several chip stocks had compelling performances in 2024, Intel (NASDAQ: INTC) and Advanced Micro Devices (NASDAQ: AMD) was not among them. Intel shares fell about 60% last year, while AMD shares were down about 18%.

Let’s examine which semiconductor stock looks like the better rebound candidate in 2025.

In a semiconductor market is largely driven by Artificial Intelligence (AI)Intel and AMD have largely followed. AMD is the distant no. 2 -designer of Graphics Processing Units (GPUs) Behind the market leader Nvidia. Intel’s market share in GPUs, meanwhile, has dropped to zero, although it wasn’t a far drop, with the company only holding a 2% market share in PC graphics cards by 2023.

AMD has struggled against Nvidia, largely because of its inferior software. In a recent study, Semianalysis called AMD’s out-of-the-box GPUs “useless” for AI training, noting that it needed “multiple teams of AMD engineers” to help it fix software bugs. However, AMD has been able to carve out a niche in AI inference, with Semianalysis saying its customers typically use AMD’s GPUs for narrow, well-defined inference use cases.

Nevertheless, AMD has been able to see strong data center growth, albeit not nearly on the same scale as Nvidia. Last quarter, it saw its data center revenue rise 122% year over year and 25% sequentially to $3.5 billion. The company credited both its Instinct GPUs and EPYC Central Processing Units (CPUs) for the jump in sales.

CPUs act as the brain of a computer, while GPUs have superior processing power. While there is a lot of deserved attention on GPUs, AMD has made a good leap into the CPU market, noting that it has participated in the CPU server market while also doing well in 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 company has still grown nicely despite the decline in its share price.

Intel, on the other hand, saw its revenue fall last quarter by 6% to $13.3 billion, and its adjusted EPS flip to a loss of -$0.46 versus a profit of $0.41 a year ago. The one bright spot last quarter was its data center and AI segment, which saw revenue rise 9% to $3.3 billion. Compared to NVIDIA and AMD, however, this is a very modest gain in this segment.

Meanwhile, its largest segment, client computing, saw revenue fall 7% to $7.3 billion. By comparison, AMD saw its client segment revenue soar 29% last quarter to $1.9 billion, showing it’s making some inroads on Intel’s core PC business.

Perhaps Intel’s biggest evil, however, stems from its foundry segment, which has been a big drag on its results. The company has been pouring money into this business through capital expenditures (CAPEX) and building new manufacturing facilities. However, the segment has been a consistent big money loser, including reporting an operating loss of $5.8 billion last quarter, or $2.7 billion when excluding an impairment charge that was not impaired.

Following the exit of its CEO Pat Gelsinger, Intel has said it could look to spin off its foundry business. The company recently received $7.86 billion in direct financing and a 25% investment tax credit from the government to continue building its manufacturing footprint in the U.S.

From a valuation perspective, Intel is the cheaper stock, trading at a forward price-to-earnings (P/E) ratio of 12.6 times versus 17.6 times for AMD.

INTC PE Ratio (Forward 1Y) chart — INTC PE Ratio (forward 1Y) Data of Ycharts.

But if you separately value Intel’s core business and its foundry business, its valuation is even more attractive.

Intel’s foundry business has lost a lot of money, but it also has a lot of physical assets. Intel has spent $68.5 billion in CAPEX, mostly on the foundry, since the end of 2021 and has $104 billion in physical assets on its balance sheet. If you take only its recent CAPEX spending and subtract its $26 billion in net debt, its foundry business would be worth about $10 per share. Share of 4.3 billion in shares. It also owns an 88% stake in Mobileyewhich is worth about $11.4 billion, or $2.66 per Intel share.

As such, it’s no surprise that the company has been the subject of takeover rumors. There are many hidden physical assets not reflected in its stock price, not to mention direct government funding and tax incentives.

AMD, meanwhile, has certainly been the stronger of the two companies, even if it hasn’t gotten the investor respect it deserves. If more AI infrastructure turns to AI inference, it could be in a good place. Meanwhile, investors should not overlook its CPU business, which has gained share in both data centers and PCs.

I like both stocks as reversal candidates this year. I like Intel a bit more because of the deep value that I think is still in the stock. However, AMD also looks like a solid rebound candidate. Fortunately, investors don’t have to choose and can add both stocks to their portfolios if they choose.

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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends advanced microdevices, Intel and Nvidia. The Motley Fool recommends the following options: Short February 2025 $27 call on Intel. The Motley Fool has one Information policy.

AMD vs. Intel Stock: Better Semiconductor Turnaround Candidate was originally published by The Motley Fool