In the last published blogpost, I had analyzed the P/E ratio and the EPS of both Intel and AMD to come up with the recommendation that the AMD stock will outperform the Intel stock by the end of 2021. As of right now, this analysis has proven to be correct, as supported by data in regards to their stock price over the past few months.
For instance, the total 1 year return of Intel today is -5.99%, as opposed to the 24.59% return on the S&P 500. The total 1 year return on Intel on August 22, 2021 (when the blog was published) was -8.95% as opposed to the S&P’s 19.05%. Since the time of the last published blogpost up to now, the gap between Intel and the benchmark S&P 500 has only continued to widen overtime. On the other hand, AMD’s Total Return for the past one year as compared with the S&P 500 for today is 50.77% in comparison to the S&P 500’s 24.59%. The 1 year return on August 22, 2021 for AMD is 19.8% as compared with the S&P’s 19.05%. In less than six months, AMD’s total return was able to go from barely beating the benchmark to returning almost double the amount of the S&P 500! As expected with Intel, the revenue growth rate of the company has been ranked D-, which is extremely low. This is in sharp contrast with the bullish ratings of AMD that have been ranked an A+ in the revenue growth area. In addition, AMD’s EPS has always outperformed the predictions for each quarter starting from Q3 of 2020 unlike Intel, whose EPS has steadily missed predictions.
Some possible reasons why Intel’s revenue has been missing targets in each quarter since the beginning of 2020 (when COVID-19 hit), includes the fact that it has lost a considerable amount of market share in the semiconductor space. Although Intel still has about 75% of the market for PC processors (especially in regards to the low-end chip market like chrome-books), AMD has gained market share at an exponential rate to account for 24.6% of the personal-computer processor sales. Most of AMD’s gains in market share comes from its stronghold in higher-end computing – that include computers meant for specific research, machine learning, etc..
On the other hand, Intel has since lost its market share in the processor space, as the demand for cheaper laptop alternatives like Chromebooks have gone down since mid 2021. The most highlighted reason for this occurrence is that many people have begun to return back to work in-person since mid 2021, when vaccinations became readily available for the general public. In addition, a lot of Intel’s notable customers like Apple, who were using Intel chips since 2007, decided to use their own M1 chips in all their MacBooks starting in 2020. The Intel CEO, Pat Gelsinger, remarked that the exit of Apple from their customer base would be one of the greatest challenges that they would need to overcome. In addition, Microsoft, Amazon, Google and other top tech companies have all been investing heavily in their chip design and manufacturing capabilities, which will lead to the deterioration of Intel’s customer base overtime.
As seen here, the points discussed in the previous blog post are supported by the current data shown. Although Intel is still a dominant player in the semiconductor market, AMD is quickly catching up. It will be interesting to see how these two companies will perform and continue to evolve in the future, and see which one will eventually dominate the semiconductor space.
Sources:
https://www.boyden.com/media/chipping-away-at-market-share-14066834/index.html
https://www.investopedia.com/articles/markets/100214/inside-intel-look-mega-chipmaker.asp
https://www.fool.com/investing/2022/01/12/better-buy-intel-vs-amd/
Out of the Box 