Several chip stocks had compelling performances in 2024; Intel(NASDAQ: INTC ) And Advanced Micro Devices(NASDAQ: AMD ) They were not among them. Intel shares are down nearly 60% over the past year, while AMD shares are down 18%.
Let’s examine which semiconductor stocks look like the best rebound candidates in 2025.
It is largely driven by the semiconductor market. Artificial Intelligence (AI)Intel and AMD They are mostly intended. AMD is a distant number 2 designer. Graphics Processing Units (GPUs) Behind the market leader Nivea. Intel’s market share in GPUs, on the other hand, is not much, but the company has a 2% market share in PC graphics cards by 2023.
AMD has struggled with Nvidia, mostly due to inferior software. In a recent study, Semianalysis called AMD’s out-of-the-box GPUs “unusable” for AI training and said it would require “several teams of AMD engineers” to help fix software bugs. However, AMD has carved out a niche in AI inference, with SemiAnalysis customers typically specifying AMD GPUs for narrow, well-defined use cases.
Nevertheless, AMD was able to see strong data center growth, although not at the same rate as Nvidia. Last quarter, data center revenue rose 122 percent year-over-year and 25 percent, respectively, to $3.5 billion. The company credited the jump in sales to both internal GPUs and EPYC central processing units (CPUs).
CPUs act as a computer’s processor, while GPUs have more processing power. While much of the focus is on GPUs, AMD has been making great strides in the CPU market, noting that it’s gaining share in the CPU server market and doing well in the PC market.
Overall, AMD saw its Q3 revenue rise 18 percent to $6.8 billion and adjusted EPS jump 31 percent to $0.92. So the company is still growing well even though the share price has fallen.
Intel, on the other hand, reported a 6% decline in revenue last quarter to $13.3 billion and adjusted EPS of -$0.46 compared to a profit of $0.41 a year ago. The bright spot last quarter was the data center and AI segment, which saw revenue rise 9% to $3.3 billion. However, compared to Nvidia and AMD, it’s a very modest gain in this segment.
Meanwhile, its largest segment, Client Computing, saw revenue fall 7 percent to $7.3 billion. By comparison, AMD saw its consumer segment revenue rise 29 percent to $1.9 billion last quarter, showing some inroads in Intel’s flagship PC business.
Perhaps Intel’s biggest woes, however, stem from its foundry division, which has been a big drag on its results. The company invested in this business through capital expenditures (Capex) by building new manufacturing facilities. However, the division has consistently lost big money last quarter, including reporting an operating loss of $5.8 billion, or $2.7 billion after excluding a non-cash impairment charge.
Intel CEO Pat Gelsinger said the move could drive the foundation business. The business recently received $7.86 billion in direct funding and a 25% investment tax credit from the government to build its manufacturing footprint in the US.
In terms of valuation, Intel is the cheapest stock, trading at a forward price-to-earnings ratio (P/E) of 12.6 times versus 17.6 times for AMD.
However, if you separate Intel’s core business and infrastructure business, the valuation is even more attractive.
Intel’s Foundry business is losing a lot of money, but it also has a lot of physical assets. Intel has spent $68.5 billion in capex, mostly on its Founding business, through the end of 2021 and has $104 billion in physical assets on its balance sheet. If you take out just the recent capex spending and take out the $26 billion in net debt, the operating business is worth about $10 per share with 4.3 billion shares outstanding. It has a share of 88 percent. My mobile$11.4 billion, or $2.66 per Intel share.
In this way, it is not surprising that the company has created rumors of a takedown. Without direct government funding and tax incentives, there are many hidden physical assets that are not reflected in stock prices.
AMD, meanwhile, was really the stronger of the two businesses, even if it didn’t get the respect it deserved for the investor. It could be well-positioned if more AI infrastructure turns to AI inference. Meanwhile, investors shouldn’t overlook the CPU business, which is gaining share in both data centers and PCs.
I like both stocks as turnaround candidates this year. I still like Intel slightly because of the deep value I think is in the stock. However, AMD also looks like a strong comeback candidate. Fortunately, investors don’t have to choose and can add both stocks to their portfolios if they choose.
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Jeffrey Seiler It has no place in the said shares. He has spots in the Motley Fool and recommends Advanced Micro Devices, Intel and Nvidia. The Motley Fool recommends the following options: Short February 2025 $27 calls on Intel. The Motley Fool has Disclosure Policy.
