The semiconductor industry, often called the chip sector, has become the cornerstone of modern technological advancement. These three companies are at the heart of the sector, shaping the landscape of computing and artificial intelligence (AI). We took a closer look to explore which stock has the best value, using TipRanks’ Stock Comparison tool.
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Nvidia
Let’s start with the dominant force in the industry. Nvidia (NVDA) has become the bellwether for the AI revolution, with its powerful chips driving the most advanced AI systems and data centers. In fact, it has a considerable advantage over its rivals, having spent over a decade mastering its Graphics Processing Units (GPUs) and the software that makes it so effective for AI applications. It’s the unrivaled leader in terms of the full-stack offering.
However, the company’s recent stock performance has raised concerns among investors. Following a dramatic decline that erased nearly $300 billion in market capitalization, Nvidia has entered bear territory, according to Goldman Sachs (GS). At the time of writing, the stock fell 24% from its intraday high set on June 20, breaking through its 50- and 100-day moving averages.
Goldman attributed the sharp decline to various factors, including post-earnings adjustments, semiconductor stocks generally performing poorly in September, and rising reports of OpenAI developing in-house chips.
This was compounded by a report that Nvidia had received a subpoena from the Department of Justice related to an ongoing antitrust probe, although the company has denied this claim. Combined with constantly shifting sentiment on AI, investors have softened their optimism on Nvidia.
Is Nvidia Stock a Buy, Hold, or Sell?
So, where does all of this movement leave Nvidia stock? Well, earnings revisions continue to be positive. Over the past 90 days, there have been 31 upward and just six downward revisions, suggesting ongoing confidence in the company’s ability to outperform.
As such, the stock is currently trading at 38.7x times forward earnings and has a price-to-earnings-to-growth (PEG) ratio of 1.03, which is very attractive for a leading technology stock.
Moreover, analysts remain broadly bullish. On TipRanks, NVDA is a Strong Buy based on 39 Buys, four Holds, and zero Sell ratings assigned by analysts in the past three months. The average Nvidia stock price target is $151.79, implying a 47.61% upside potential.
AMD
AMD (AMD) is arguably Nvidia’s biggest competitor in the AI space despite having a much smaller market share. Nvidia controls 80% of the AI accelerator market, but AMD has been tipped to build its own market position. The company’s strategic approach differs from Nvidia’s, focusing on hardware efficiency rather than offering a full-stack solution.
In fact, the company recently claimed that its latest Instinct MI300x offered 40-60% better latency and throughput than Nvidia offerings. NVDA has challenged these claims. Moreover, while AMD’s software ecosystem lags behind Nvidia’s, recent acquisitions of Silo AI and ZT Systems indicate a move towards developing a more comprehensive AI stack.
Surging demand for AI and data center components and AMD’s competitive chipset offering resulted in an 80% revenue increase year-over-year to $2.3 billion in Q1 2024. Strength in the Data Center segment hasn’t been matched throughout the business. Also, the Gaming Segment slumped in Q1, with revenue dropping 59% year-over-year to $648 million.
Is AMD Stock a Buy, Hold, or Sell?
So, what does this mean for the buy thesis? AMD stock has pulled back from its highs several times this year and fell along with its peers in early September. As a result, it does appear cheaper on paper. However, it’s worth noting that there have been more negative revisions than positive revisions over the past 90 days — 26 downwards and nine upwards.
That’s not entirely good news, but the broad consensus for growth remains positive when adjusted for growth. AMD stock currently trades at 41.6x forward earnings, but the PEG ratio is just 0.97. Anything below one typically suggests undervalued conditions, and it’s tough to come across technology stocks with such an active PEG ratio.
Moreover, analysts remain bullish on AMD stock. On TipRanks, AMD comes in as a Strong Buy based on 26 Buys, six Holds, and zero Sell ratings assigned by analysts in the past three months. The average AMD stock price target is $190.25, implying a 41.61% upside potential.
Intel
Intel (INTC) has experienced a challenging few months, with some analysts losing confidence in the company’s ability to regain its position in the semiconductor industry. But the signs haven’t been good for some time.
Intel’s problems started almost a decade ago. Typically, the company improves the process by which it makes new chips — this is called a node. But around 2014, INTC started to have trouble with its innovation cycle. This didn’t bother them for a while, as it increased revenue by selling older chips made in increasingly outdated processes.
This was fine for a while, but the good times came at the expense of the company’s future. It all came to a head during the pandemic when the firm’s technological shortcomings were exposed.
In turn, the exposure of these shortcomings resulted in the appointment of CEO Pat Gelsinger, who kicked off the ambitious “five nodes in four years” strategy. This strategy aims to accelerate the development of its technology process and catch up with industry leaders. It’s still early days of the company’s strategy shift, so predictions about its outcome are premature and speculative at this point in time. One thing is certain, this will be a long journey.
Is Intel Stock a Buy, Hold, or Sell?
The problems that exist today result from poor decision-making a decade ago. The stock currently trades at 75.4x forward earnings and has a PEG ratio of 1.88. These metrics suggest the stock could still fall further. However, we must ask ourselves if the decisions made today will bring back the good times.
Analysts are split on Intel. On TipRanks, INTC comes in as a Hold based on one Buy, 26 Holds, and five Sell ratings assigned by analysts in the past three months. The average Intel stock price target is $26.09, implying a 38.12% upside potential.
The Bottom Line
So, which stock is the best value? Personally, given its recent performance, I believe Intel represents something of a speculative investment. However, I’m bullish on both Nvidia and AMD. Both stocks trade at significant discounts to their average share price target and have attractive PEG ratios.
