Intel Corporation (INTC) vs Advanced Micro Devices (AMD)
Quick Stats
With this quick checklist, we can differentiate between INTC being a more mature and stable company with higher margins and AMD being a growth company with great potential ahead.
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Summary
Both companies operate in the Semiconductors industry which is currently facing a great shortage along the global supply chain. This shortage was caused mainly by the pandemic as lockdowns arrived and people stayed at home, demand for electronic goods such as smartphones, tablets, personal computers, etc. increased substantially. As demand for other products such as vehicles decreased, chip manufacturers, switched their orders to companies selling consumer electronic goods, as demand for vehicles increased again rapidly, it was too late for the automakers.
Intel Corporation designs, manufactures, and sells essential technologies for the cloud, smart, and connected devices for retail, industrial, and consumer uses worldwide. The company was founded in 1968 and is headquartered in Santa Clara, California. Its operations are divided into two segments:
- Data-centric Business includes other subsegments:
- Cloud-based services (36%)
- IoT (6%)
- Autonomous Driving (2%)
- Programmable semiconductors (3%)
- The PC-centric business offers platform products (chips, memory and storage products, etc.) that connect people to data, being its largest business unit accounting for 53% of the total revenue.
Advanced Micro Devices was founded in 1969 and is headquartered in Santa Clara, California. It operates in two segments:
- Computing & Graphics (65%)
- Enterprise, Embedded and Semi-Custom (35%)
Central Processing Unit (CPU): It generally consists of hundreds of millions or billions of transistors that process data in a serial fashion and control other devices in the system, acting as the “brain” of the computer.
Graphics Processing Unit (GPU): is a programmable logic chip that helps render images, animations and video and is increasingly being used to handle general computing tasks.
Accelerated Processing Unit (APU). Consumers increasingly demand computing devices with improved end-user experience, system performance and energy efficiency.
The Enterprise, Embedded and Semi-Custom Markets address the need for computational and visual data processing in the Server, Embedded computing device, and custom designed computing device markets. We service these markets with our CPU, GPU, APU, and customized designed system-on-chips products.
| INTC | AMD |
Price | $49 | $120,23 |
Market Cap (MM) | $199,3B | 145,2B |
Shares Outstanding | 4,1B | 1,2B |
P/E Ratio (TTM) | 9,5 | 37,09 |
49,7 | ||
EPS (TTM) | 5,16 | 3,24 |
2,52% | - | |
*Dividend yield is the average of 2021
Competitive Advantage
We may see on the recent news that AMD is slowly eating Intel's market share, which is probably one of the reasons why its price is increasing so much lately compared to Intel's, but we also have to take into account that both companies have been in the business for several decades and until now Intel has always been the leader.
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| Intel Vs. AMD: Competitive Prospects |
- Intel is on the verge of taking away the performance crown from AMD
- Perhaps in the most important market segment, servers, AMD looks to be ahead of Intel until late 2023
- Intel also seems to be improving its process technology at a higher cadence now, and its push into the foundry business might also be favorable
Upper conclusions by Paulo Santos on seekingalpha.com
Market Overview
Currently, over 80% of the current manufacturing capacity is concentrated in Asia, being Taiwan Semiconductors Manufacturing Company (TSM) the world's leading semiconductor foundry. Watching the global shortage of the industry the U.S government does not like to be so dependent on foreign manufacturers, for this reason, has planned to invest $50 billion for semiconductor production and research. Intel, also aware of the current situation also plans to invest $20 billion into new factories to manufacture chips in-house.
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| The Semiconductor Industry Landscape was valued at USD 439.8 billion in 2020, and it is projected to be worth USD 679.6 billion by 2026. |
Executive Team
- Both companies seem to have aligned the executive with the shareholders' interests.
- The executive's officers value of the shares they own is multiple times the value of their annual salary.
Intel's Executive Compensation Summary
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Executive officers must accumulate and hold shares of Intel's common stock based on a multiple of their base salary within five years of their appointment as an executive officer or promotion.
AMD's Executive Compensation Summary
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Performance-Based Restricted Stock Units (PRSUs) Restricted Stock Units (RSUs) |
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| Compensation Philosophy and Objectives (Pay for Performance) |
3Q 2021 Press Release (Financial Highlights)
| INTC | AMD |
Revenue | $18,1B (+5% YoY) | $4,3B (+54% YoY) |
Gross Margin | 57,8% | 48% |
EPS | $1,71 (+59% YoY) | $0,75 (+134% YoY) |
Valuation
INTC
Optimistic (Revenue growth is 12%, Operating Margin 30%, Rounding the Average multiples of the last 5 years)
Standard (Revenue growth 8%, Operating Margin 30%, Average multiples 5 years)
Unfavourable (Revenue growth 5%, Operating Margin 28%, Lower multiples)
AMD
Optimistic (Revenue growth is 25%, Operating Margin 15%, Average multiples 5 years)
Not even with the most optimistic variables, we obtain profitable returns if we choose AMD as our investment.
Price Overview (YTD)
Conclusion
- The global shortage of semiconductors is expected to ease throughout 2022 and go back to normality by 2023.
- Both companies have a lower PE Ratio than the industry's average.
- Considering AMD as a growth stock we may expect a greater return, hence we can accept to pay a higher price for it. At the same time, we have to be aware that currently, it is a more speculative investment as it has an expensive valuation.
- Both companies have been competing against each other for many decades and usually, Intel has always been able to overcome AMD.
- Intel's investment plan in new foundries will make the company rely less on foreign manufacturers, which should make increase the margin in the long term.
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