AMD Vs. Intel Stock: Which Is The Better Buy?
- Long Ideas
Dec. 28, 2022 11:55 AM ETAdvanced Micro Devices, Inc. (AMD), INTC27 Comments
Bill Zettler
Marketplace
Summary
- AMD’s share price is down more than 58% and Intel’s is down more than 49% over the year.
- Intel has a substantial 5.6% dividend.
- Both companies have a bright future over the next few years.
- Looking for a helping hand in the market? Members of Turnaround Stock Advisory get exclusive ideas and guidance to navigate any climate. Learn More »
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Advanced Micro Devices, Inc. (NASDAQ:AMD) and Intel Corporation (NASDAQ:INTC) are well-known chip producers that compete in some areas and not in others.
Intel is a much larger company with revenues of $70 billion TTM (Trailing Twelve months) compared to AMD’s $23 billion.
However, price-wise, both companies have suffered over the last year with Intel dropping 49% and AMD a breathtaking 59%.
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To see how bad it has been for tech stocks since the beginning of the year, the next chart adds Invesco QQQ Trust (QQQ) as a proxy for the tech market in general.
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QQQ has done better than AMD and Intel but was still down a significant 34%.
In this article, I will compare AMD to Intel to see which one is the best investment at the current time.
AMD And INTC Stock Key Metrics
As you can easily see Intel is a much larger company based on revenue (Line 2). But when it comes to Price/Sales (Line 3) Intel appears to be a much better value with a ratio of 1.8x versus AMD’s 5.1x.
Historically, AMD has had a much higher value than Intel based on sales. This would imply that if AMD were to return to its historical price/sales levels it could have considerable upside in the future.
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As you can easily see in the table below, Intel is a much larger company based on revenue (Line 2). When it comes to Price/Sales (Line 3) Intel appears to be a much better value with a ratio of 1.8x versus AMD’s 5.1x.
Gross Margins (Lines 5, 8 and 9) are also interesting with AMD having a slightly better gross margin overall (Line 5) 51% to 47%, but much lower GM (Line 4) when compared to Market Value (Line 8) and Enterprise Value (Line 9).
This could imply that Intel is underpriced compared to AMD.
The PE Ratio (Line 11) is closer than the historical comparison because AMD has suffered a severe fall in price since the first of the year.
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The FCF lines 15 and 16 are a bit distorted by Intel’s current huge CAPEX spending to expand its fabs. Historically, Intel has had, and I think will continue to have a huge FCF (Free Cash Flow) advantage over AMD.
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Based on financial metrics, Intel has better numbers than AMD.
Is AMD A Direct Competitor To Intel?
Intel and AMD’s competition goes all the way back to 1981 when IBM selected little-known Intel to be the main manufacturer of the PC’s CPU chips. However, IBM insisted that they have a backup plan in case Intel did not do the job and selected AMD. Since that time both companies have shared the IP associated with the X86 chips originally used in the IBM PC.
Fast forward to today and both companies compete vigorously in both the PC/laptop market and the server market. In recent years, AMD’s server technology has proven to outperform Intel’s and has allowed AMD to gain market share in both the desktop/laptop and the highly profitable server market.
As the chart below shows, AMD’s share has increased pretty steadily since 2019.
Statista
How Are Intel And AMD Stock Different?
The biggest difference between AMD and Intel revolves around FABS (microprocessor Fabrication plants). Intel manufactures its own CPU’s in its own FABs while AMD is what is known as «fabless» i.
e., AMD subcontracts their production to other companies, in AMD’s case mostly to Taiwan Semiconductor Manufacturing Company (TSM).
Intel intends to expand its own manufacturing for others by spending $10s of billions building new fabs and will at that time be more of a competitor to TSM than they are now. In fact, I would not be surprised if Intel manufactures some of AMD’s chips in the future.
I wrote about the Intel/TSM competition in this article. «Intel Vs. Taiwan Semiconductor: Which Giant Chip Company Is The Best Investment Choice By The End Of 2025?».
Are These Stocks Fairly Valued?
If we look at analysts’ ratings for both stocks we see that AMD is highly rated and Intel not so much. AMD has 54 Buy recommendations and zero, none, nada Sell recommendations. That is impressive.
Intel on the other hand has 16 Buys but a bothersome 11 Sell recommendations. Obviously, analysts are less than enamored with Intel’s plans and performance.
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But looking at the quant ratings both companies currently have a Hold rating.
Do the quants know something the analysts don’t?
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In my opinion, both these stocks are underrated based on historical performance and the inevitable turnaround in chip stocks will show up in the next year or two.
Is INTC Or AMD Stock A Better Long-Term Buy?
One of the advantages Intel has over AMD is the consistent share buyback plan that has been in place for years. Looking at the share comparison between the two companies we can see that Intel’s share count has dropped by 20% while AMD’s has soared by 98%.
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Of course, AMD’s increase was mainly due to its acquisition of Xilinx which I wrote about previously «AMD: Xilinx Deal Continues To Hold AMD’s Price Down».
As we saw in the Financial metrics section above, Intel has a substantial advantage when it comes to the dividend with a current yield of 5.6% versus zero for AMD.
The future is bright for both companies because the pursuit and production of new, smaller, faster, smarter, and more useful chips are relentless and ongoing.
Some of the markets such as AI (Artificial Intelligence) are expected to grow at a 34% CAGR and brain-like chips by a staggering 94% CAGR.
The semiconductor market as a whole is projected to grow by $440 billion from 2021 to 2029.
AMD’s market is much smaller than Intel’s, but it has a very high margin, especially AMD’s server ships. AMD just last week announced Genoa, a new chip for its server line.
Intel’s goal to build new fabs all over the world will require massive CAPEX even more than their historically high CAPEX spending.
Intel’s massive CAPEX requirements for new fabs will most likely affect Free Cash Flow negatively until the fabs start producing in quantity.
The obvious investment question is whether now is the time to buy either AMD or Intel. Both have shown share price losses over the last 6-8 months in the face of continued logistics and market problems.
If you are looking long term, say five years, I think Intel’s future is very bright because of the huge number of chips required to be made in the future and the limited sources for those said chips.
Intel’s profits could be huge.
AMD’s forte is new more powerful chips that power servers, PCs, laptops, and graphics. Competition in those areas will continue to mount with ARM chips becoming more and more competitive as witnessed by Amazon’s (AMZN) new ARM-powered servers.
In the graphics market, Nvidia (NVDA) is a huge competitor, as I wrote about here «Nvidia Vs. AMD: Is Either One Worthy Of Investment Right Now?».
For long-term investors, I still believe Intel has a huge upside over the next five years, though the next two or three years could be volatile.
AMD is a leader in high-margin server chips, but faces increased competition every year in every one of its markets. However, over the next year or two, it may have a nice surge upward but not anywhere near its old high of $160.
At its current price, AMD is a Buy with a price target of $100 by the end of 2024.
Intel is a Buy for long-term investors.
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This article was written by
Bill Zettler
13.02K Followers
Author of Turnaround Stock Advisory
Focused on value stocks with turnaround potential and low risk/reward ratio
Trained as a scientific programmer, I worked on war game software for NORAD (North American Air Defense) and statistical software for Abbott Labs. For most of my 40-year career developed and sold financial and accounting software. Was principal or founder of 3 small (5-30 employees) software companies. Wrote a book on public pensions and a play that won an award in Writer Digest Magazine’s annual writers competition, a contest that draws over 10,000 entries a year. Currently retired.
Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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What is the Difference Between AMD and Intel? (with pictures)
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Advanced Micro Devices (AMD) and Intel are two different companies that produce motherboards and central processing units (CPUs) found within personal computers.
The CPU is probably the most important part of the computer, as it is where most calculations take place that run computer programs and systems. The speed with which a CPU can process these calculations is usually given in megahertz (MHz) or gigahertz (GHz). Motherboards provide the circuitry for all computers to function.
Both Intel and AMD build motherboards provide the circuitry needed for computers to function.
While both AMD and Intel offer a range of different CPUs with differing speed processing speeds and price levels, Intel owns a greater percentage of market share. Both companies have been making computer components for decades and are said to be the leaders in research and development in the computer industry for this field.
Since these are two different companies, it can be difficult to compare the products created by each of them. One of most commonly listed differences is the fact that AMD tends to be cheaper than Intel.
Some people choose AMD products over Intel because they tend to be less expensive while providing comparable functionality.
Intel has been the established leader for producing circuit boards and CPUs from the start. It is said that AMD has been influenced by the prices and technological advances of Intel, and not only does AMD produce their own lines chips and motherboards, they also produce cloned versions of Intel products.
Some people choose AMD over Intel because the chips and circuit boards provide almost identical functionality, but the AMD version is about half the price of the Intel one.
Besides cost, the other key differences between AMD and Intel processors are the clock speed and the socket used to connect the processor to the computer. The clock speed is the number of operations a computer can perform in a clock cycle, which is usually one second. Due to design differences, Intel processors are usually faster than AMD ones, but AMD processors are more efficient. As such, for each processor, the Intel version is usually slightly faster than its AMD counterpart.
The difference in sockets is an important factor to consider.
Not only do the connectors not match up, the electrical characteristics and instructions used are different. This is important if anything were to happen to the processor in a computer because, if it had to be replaced, it would have to be replaced by the same brand. Processors can be upgraded, but again, the same brand must be used when making the replacement.
An Intel CPU.
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Intel or AMD? — Ferra.
ru
Throughout 2005, there was a tense struggle for market leadership between Intel and AMD. Well, it’s time to take stock and announce the winner. However, the results are so obvious that they hardly need any comments. If we talk about processors, the unconditional victory was won by AMD, whose processors are both more productive and cheaper, and have less heat dissipation. Of course, here one can object and refer to the fact that everything depends on the comparison parameters, and to the possibility of different interpretations of the concept of performance. Of course, you can find an application (and even more than one) in which Intel processors will prevail over AMD, and, for example, Intel Pentium 4 670 will be more productive than AMD Sempron in all applications. This, of course, will be about comparing processors that are comparable in price. That is, if we compare the performance of Intel and AMD processors, which are approximately the same in cost, then, of course, the performance of AMD processors will be higher.
Top models of AMD processors (we are talking about gaming processors AMD Athlon 64 FX-55/57) also outperform Intel processors, and AMD is the leader in the segment of budget processors. nine0005
Of course, speaking about the superiority of AMD processors over their competitors, one important reservation must be made. We are in no way talking about a significant superiority that could be seen «with the naked eye». That is, we can assert with full responsibility that there is no such application in which the user could determine “by eye” which processor — Intel or AMD — is used in the system (of course, we are talking about comparing comparable processors). Therefore, when talking about the superiority of some processors over others, it is appropriate to recall the analogy with competitions, when the winner is not obvious and is determined by the photo finish. nine0005
So what really happened in the IT market that allowed AMD to take the lead?
The king is dead. Long live the king!
To answer this difficult question, let’s remember that throughout the history of the Intel Pentium 4 family of processors, the main means of improving performance has been increasing the clock frequency.
Actually, the NetBurst architecture itself, which is the basis of the Intel Pentium 4 processors, was originally designed for frequency scaling. The focus of this microarchitecture was an unprecedentedly long pipeline, which, in fact, made it possible to increase clock frequencies. And the recipe for increasing the clock frequency has served faithfully throughout the entire history of the Intel Pentium 4 processor family. There was plenty of optimism regarding clock frequencies, and forecasts were already slipping that the day when the processors would operate at frequencies of 10 GHz and more was not far off. Indeed, starting from a frequency of just over 1 GHz, the clock frequency of Intel Pentium 4 processors first crossed the 2 GHz line, then 3 GHz and began to stubbornly approach the 4 GHz mark. nine0005
It would seem that everything is wonderful and there is no reason to doubt that the barrier of 4 and 5 GHz will also be successfully overcome. But… As the clock frequency grew, so did the power consumption of the processors, and, as a result, the heat dissipation.
And even the transition from a 130-nanometer process technology for the production of processors to a 90-nanometer could not fully solve all the problems. Apparently, Intel’s forecasts regarding the possibility of overcoming the problem of leakage currents (it is the resulting leakage currents that are the main reason for the increase in power consumption and heat dissipation of processors) turned out to be wrong. To be more precise, we are not talking about the fundamental possibility of solving the problem of leakage currents in general, but about the possibility of solving this problem without a significant increase in the cost of the production process of processors. That is, there is no reason to doubt that Intel knows the recipe for how to make a processor with a NetBurst architecture with low power consumption and, as a result, with high clock speeds, but it is equally obvious that this will require a significant increase in the cost of the manufacturing process, which will make this processor uncompetitive.
If we talk about the existing technological process for the production of processors, then the reality is that the top models of Intel processors emit more than 100 W of heat, and the clock frequency of the processors is frozen at around 3.8 GHz. nine0005
In principle, nothing prevents the creation (announcement) of a processor with a frequency of 4 GHz, the only question is how to cool it. Existing cooling systems (both air and water) are at the limit of their capabilities, and they simply cannot cool a system with a frequency of 4 GHz. By and large, even modern Intel Pentium 4 processors with a heat dissipation of more than 100 W often operate in thermal protection mode, when, when a critical temperature is reached, the processor core clock is suspended for certain periods of time, which allows the processor to cool down. From all this, it becomes obvious that within the framework of the existing microarchitecture and the technological process of manufacturing processors, there is no need to wait for a further increase in the clock frequency of the Intel Pentium 4 family processors, and the clock frequency of 3.
8 GHz will remain the maximum frequency for a long time to come. It would seem that the development of the NetBurst architecture has come to a standstill, having stumbled upon the problem of heat dissipation. Of course, after the transition to a 65-nanometer process technology, a certain technological margin will be created for increasing the clock frequency, but it is also obvious that the heat dissipation of the processor and the impossibility of cooling it will again become a stumbling block. As a result, most likely, the clock frequency will be increased, perhaps even up to 5 GHz, but in terms of performance increase, this is not so much, and spending billions of dollars on the development of a new manufacturing process for the sake of a performance increase of only 20 — 30% is simply wasteful and illogical. nine0005
Of course, it would not be entirely correct to say that increasing the clock frequency is the only way to increase the performance of processors with the NetBurst architecture.
With each new version of the processor core, that is, with the transition to a new process technology for the production of processors, the microarchitecture of the core was also subjected to cosmetic changes. So, the length of the pipeline was gradually increased by adding Drive gear ratios, which also contributed to the possibility of further increasing the clock frequency. In addition, the size of the L2 cache increased, and individual processor blocks were improved. In addition, at one time the NetBurst architecture was supplemented with Hyper-Threading technology. Actually, the Hyper-Threading technology was incorporated into the Intel Pentium 4 processors from the very beginning, however, for marketing reasons, its announcement and unlocking in processors was made only three years after the announcement of the processors of this family themselves. Recall that the main task of the Hyper-Threading technology was to, if possible, eliminate the negative consequences of the super-long pipeline of the Intel Pentium 4 processor and load it as much as possible.
All this also contributed to an increase in processor performance, but did not solve the main problem — the problem of heat dissipation. nine0005
When it became obvious that the further growth of the clock frequency of the Intel Pentium 4 family processors at the same pace as it was at the dawn of the NetBurst architecture was impossible, the marketing plan began to gradually move away from the frequency. The first step in this direction was taken when the explicit clock frequency was removed from the name of the processors, and the serial numbers of the processors came to replace it. The explanation for the need to use processor serial numbers was quite logical, because, in addition to the clock frequency, processors are characterized by such parameters as FSB frequency, L2 cache size, and a set of supported technologies. And only all these characteristics together determine the performance of the processor, and therefore an indication of only one clock frequency would be incorrect.
Moreover, there are processors with the same clock speed, but with a different cache size and a set of supported technologies. In addition to purely practical considerations, the introduction of serial numbers of processors pursued another very important marketing goal — it was necessary to wean users from comparing the processor clock frequency with its performance. Actually, Intel began to fight exactly what it had taught us for so long (and, in fact, began to correct its own marketing mistakes). nine0005
Since the main trump card of the NetBurst architecture ran into the problem of heat dissipation, and the lack of a model range of processors threatens to lose market share, processors began to gradually endow with various functionalities. And first of all — energy-saving technologies Enhanced Intel SpeedStep and thermal monitoring technologies Thermal Monitor and Thermal Monitor 2. In addition, there is support for 64-bit memory expansion (Intel EM64T), as well as support for hardware virus protection Execute Disable Bit.
All these technologies allowed Intel to expand the range of processors of the Intel Pentium 4 family, but how much they are really in demand is a separate question. In fact, the Intel SpeedStep, Thermal Monitor and Thermal Monitor 2 technologies make it possible to partially solve the problem of processor heat dissipation, but at the expense of reducing the frequency and voltage of the processors. Of course, these technologies are in demand, and without them, top models of processors would simply overheat. With regard to the demand for Intel EM64T and Execute Disable Bit technologies, everything is very simple. How many users now use more than 4 GB of memory in their computers? And how many users are there who know exactly what and where to configure in order to activate or, conversely, deactivate the Execute Disable Bit technology? We think the answer is quite obvious. nine0005
In addition to endowing processors with various functionalities and technologies, Intel has revised the marketing strategy for the development of processors.
And if earlier the main leitmotif of the development of processors was performance, now the thesis of optimized performance, that is, performance per watt of electricity consumed, is at the forefront.
So, summing up all of the above, it becomes obvious that at present the development of the NetBurst architecture has come to its logical conclusion. Whether this architecture was initially erroneous and how much it was able to justify the hopes placed on it is a separate question. In our opinion, it would be wrong to talk about the fallacy of architecture. Do not forget that this technology faithfully served Intel for five years. nine0005
But what’s next? Dead end? What is the dead end, if we can already talk about the reincarnation of NetBurst technology in dual-core processors of the Intel Pentium D family? Yes, indeed, realizing the impossibility of effectively scaling the clock frequency of processors, both Intel and AMD began to talk about the possibility of further increasing processor performance by switching to dual-core and, later, multi-core processors.
Indeed, the transition to a dual-core architecture of processors can improve their performance, but with one caveat. This requires the use of applications that could be well parallelized, that is, they were initially focused on multiprocessing. So far, there are few such user applications, and in most cases it is not necessary to expect a significant increase in performance. However, there are many examples of when the dual-core architecture of processors has a positive effect on performance growth. For example, when using several applications at the same time, which is becoming the norm in office work, the work of designers, layout designers, etc., that is, the benefits of dual-core processors are obvious. nine0005
On the other hand, if we talk about dual-core Intel Pentium D processors, dual-core itself does not solve the main problem of the NetBurst architecture — the problem of heat dissipation. For example, the top dual-core processors of the Intel Penium D family have a heat dissipation of 130 W with all the ensuing negative consequences.
Therefore, if we talk about the architecture of NetBurst, then this is really a dead end branch of development.
However, in Intel itself, the fact that a moment will inevitably come when a further increase in clock frequency will run into the problem of heat dissipation has become obvious for a long time. That is why in the bowels of the laboratories of Intel Corporation, for several years now, a fundamentally new architecture of next-generation processors has been being developed, a microarchitecture that will form the basis of both desktop and mobile and server processors. Moreover, processors with a new microarchitecture will appear at the end of 2006, so the wait is not so long. Well, if we talk about today, it can be called a transitional period and can be characterized as the decline of the NetBurst architecture and the birth of a new processor microarchitecture. And during this transitional period, the advantage will be on the side of AMD processors. In whose favor the advantage will be after the announcement of the new Intel processor microarchitecture — time will tell.
nine0005
AMD: reasons for success
So, the reason for AMD’s success is quite clear. The advantage in its favor (only in terms of processor performance) became possible against the background of the fact that the NetBurst architecture has come to its logical conclusion, and the new architecture, although developed, has not yet been born.
It would seem that right now, in this transitional period for Intel, AMD has very good chances to win a significant market share. But not everything is so simple. If we talk about AMD, then its activities can be briefly described as follows: excellent processors and absolutely mediocre marketing. Actually, there is no need to talk about any marketing policy of AMD at all. This policy simply does not exist. There is no advertising of their products, no thoughtful policy to conquer the market. Maybe AMD really doesn’t need any marketing. AMD processors are already in demand, and there is simply no point in increasing it even more. Do not forget that AMD has only two factories for the production of processors, and the company is simply not able to produce more than the quantity that is produced at the moment.
Therefore, there is no need to talk about the possibility of a significant revision of the market share of AMD processors. nine0005
On the other hand, all the problems that Intel has already faced, will inevitably await AMD. And although AMD itself has never presented the increase in clock speed as a recipe for increasing processor performance, it has always followed it. Already, the clock frequency of AMD processors for top models is 2800 MHz, and the heat dissipation has exceeded 100 W. If you try to further increase the clock frequency, there will be problems with processor cooling. Actually, already now it is a whole problem to cool the top models of AMD processors, and given that they lack thermal protection technology (only emergency shutdown mode), computers often freeze due to overheating. nine0005
What exactly AMD is planning to do to solve the problem of processor heat dissipation is not entirely clear. In any case, the company did not announce any development of a new microarchitecture.
And it’s too early to think about a new microarchitecture. After all, the AMD64 architecture is still quite young and it still needs to be recouped.
Of course, the AMD64 architecture has a technological headroom for clock frequency scaling. Thus, the transition to a 65-nm manufacturing process, which according to AMD’s plans will take place in 2007, will further increase the clock frequency and, as a result, the performance of the processor. However, 2007 is the future. If we talk about today, then AMD has the same impasse as Intel — you can release a processor with a clock speed of 3 GHz, the only question is how to cool it. Moreover, one can even assume that AMD will actually do this and release the AMD Athlon64 FX-59 processor.with a clock frequency of 3 GHz, but most likely it will be a virtual processor with a fabulous price, which, firstly, is unlikely to be bought (try to buy an AMD Athlon64 FX-57 processor on the market now), and even if it succeeds buy, then it will be oh so difficult to cool.
What remains for AMD to do before the transition to the 65-nanometer process technology? AMD, of course, has trump cards in reserve. For example, nothing prevents adding support for DDR2 memory to processors. You can even switch to using a new processor socket, as Intel did in its time, replacing Socket 478 with LGA775. And if AMD follows this example by launching processors in a new package with a socket, for example, Socket M2 (this is a hint), then here’s another line of processors for you. You can even add new functionality to the processors, for example, thermal protection technologies, virtualization technologies (similar to Intel Vanderpool technology) and data protection (similar to Intel LaGrand technology). , especially since the «path» has already been trodden and all that remains is to follow it. nine0005
However, all these recipes will not solve AMD’s main problem — the problem of heat dissipation. And something suggests that after the announcement of the new Intel processor microarchitecture, the balance of power in the processor market may change significantly in favor of the latter.