Chip makers continue to face headwinds in certain end markets, mainly the PC market. Nonetheless, investors are upbeat about several chip stocks due to the demand induced by the growing interest in generative artificial intelligence (AI) applications. We used TipRanks’ Stock Comparison Tool to place Intel (NASDAQ:INTC), Advanced Micro Devices (NASDAQ:AMD), and Qualcomm (NASDAQ:QCOM) against each other to find the most attractive chip stock as per Wall Street analysts.
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Intel (NASDAQ:INTC)
Chip giant Intel impressed investors last month with its better-than-anticipated Q2 2023 results and third-quarter outlook. The company’s Q2 2023 revenue fell 15% year-over-year to $12.9 billion. Despite a continued decline in revenue, the company returned to GAAP profitability after two consecutive quarters of losses.
Intel’s cost reduction efforts helped it improve its Q2 2023 bottom line. The company expects to generate $3 billion in cost savings this year.
While Intel said that cloud companies are focusing more on getting graphics processors for their AI applications instead of Intel’s central processors, it is confident that in the longer term AI will expand the total addressable market for its server CPUs.
What is the Target Price for Intel Stock?
On July 28, Truist Financial analyst William Stein increased his price target for Intel to $37 from $32 and reiterated a Hold rating on the stock. The analyst noted that the company reported its second consecutive “good quarter” with its commentary around manufacturing process improvements, new products, and cost-cutting all seen as constructive.
Nonetheless, Stein cautioned that two quarters are still a “fragile trend,” and he sees the company’s total addressable market for the company’s X86 to remain challenged over the long term.
Wall Street is sidelined on INTC, with a Hold consensus rating based on five Buys, 19 Holds, and six Sells. The average price target of $36.07 implies 2.7% upside. Shares have risen 33% so far in 2023.
Advanced Micro Devices (NASDAQ:AMD)
Advanced Micro Devices’ Q2 2023 results beat analysts’ estimates, even as revenue declined 18% due to persistent weakness in the PC market. Revenue from the data center segment declined 11% year-over-year but was up 2% sequentially. The growth compared to the first quarter was a result of the accelerated adoption of Intel 4th Gen EPYC CPU, with revenue nearly doubling sequentially due to robust demand in the cloud market.
During the Q2 earnings call, AMD CEO Lisa Su said that 30 new AMD instances were launched in the cloud in the second quarter, with multiple Genoa processor instances announced by Amazon’s (NASDAQ:AMZN) Amazon Web Services, Alibaba (NYSE:BABA), Microsoft (NASDAQ:MSFT), and Oracle (NYSE:ORCL). Overall, the company expects its EPYC revenue to grow by a double-digit percentage sequentially in Q3 2023, driven by the robust demand for the 4th Gen EPYC CPU.
While AMD’s Q3 2023 revenue guidance fell short of expectations, it remains confident about the road ahead. With regard to the opportunities in generative AI, the company said that customer interest in its MI300A and MI300X GPUs is very high. AMD sees a multibillion-dollar growth opportunity in AI across cloud, edge, and other endpoints. For instance, in the data center space alone, AMD expects the market for AI accelerators to reach over $150 billion by 2027.
Is AMD a Buy, Sell, or Hold?
Following the Q2 print, Citigroup analyst Christopher Danely upgraded his rating on AMD to Buy from Hold on August 2 and increased the price target to $136 from $120.
Danely had earlier thought that AMD’s AI products would be margin dilutive and investors would be concerned about the stock’s expensive valuation. However, the analyst admitted that he was “wrong on both counts.”
Wall Street’s Strong Buy consensus rating on AMD stock is based on 25 Buys and six Holds. The average price target of $142.38 implies nearly 23% upside. Shares have rallied 79% year-to-date.
Qualcomm (NASDAQ:QCOM)
Qualcomm’s fiscal third-quarter earnings surpassed the Street’s expectations, but Q3 revenue and a weak outlook for the fiscal fourth quarter disappointed investors. The company’s high exposure to the slumping handset market adversely impacted its Q3 FY23 revenue, which declined 23% year-over-year to $8.5 billion.
Moreover, Qualcomm expects Q4 FY23 revenue in the range of $8.1 billion to $8.9 billion, reflecting a year-over-year decline in the range of about 22% to 29% due to macroeconomic pressures, weak mobile devices market, and channel inventory drawdown.
Looking ahead, the company believes that it is uniquely positioned to capitalize on the upcoming on-device Gen AI opportunity. The company claims that its AI technology is highly differentiated, backed by high-performance, low-power heterogeneous computing across its central processing unit (CPU), graphics processing unit (GPU), and neural processing unit (NPU) offerings.
What is the Forecast for Qualcomm Stock?
On August 3, Deutsche Bank analyst Ross Seymore downgraded Qualcomm from Buy to Hold and lowered the price target to $120 from $130. The analyst contended that the continued headwinds that the company is facing in the Handset segment raise concerns that the issues are not just cyclical but structural as well.
In contrast, Piper Sandler analyst Harsh Kumar reiterated a Buy rating on QCOM and said that the company does not seem to be losing market share but is just stuck in a tough handset market.
With 13 Buys and five Holds, Wall Street has a Moderate Buy consensus rating on Qualcomm. The average price target of $136.75 implies 12.6% upside. Shares have risen 10.5% so far in 2023.
Conclusion
Wall Street is highly bullish on Advanced Micro Devices and sees higher upside potential in the stock compared to Intel and Qualcomm. Aside from analysts, hedge funds are also optimistic about the stock and increased their holdings in AMD by 430,000 shares last quarter. As per TipRanks’ Hedge Fund Trading Activity Tool, the Hedge Fund Confidence Signal is Positive on AMD.
