Best Semiconductor Stock to Buy: Intel Stock vs. AMD Stock
Summary
Parkev analyzes the competition between Intel and AMD, specifically looking at how the rise of Agentic AI is increasing the importance of CPUs in data centers. Parkev notes that while Intel has historically dominated, AMD has steadily gained market share, with its revenue growing from $7 billion in 2017 to $37.5 billion recently. Parkev highlights that Wall Street analysts are exceptionally optimistic about AMD, forecasting a tripling of revenue to over $104 billion by 2028, whereas Intel is expected to reach $73 billion in the same period.
Regarding profitability, Parkev explains that both companies suffered margin collapses in 2022 due to a post-pandemic slump in consumer electronic sales. However, Parkev expects profit margins to recover to the 20-25% range as Agentic AI drives a new cycle of data center investments. Parkev also compares the companies' business models, noting that Intel's capital-intensive manufacturing approach results in a lower return on invested capital (-2.05%) compared to AMD’s fabless, asset-light model (7.56%). Finally, Parkev uses a discounted cash flow (DCF) model to determine fair value, concluding that both companies are technically overvalued but AMD is the better pick.
Mentioned Stocks
Reasoning: Parkev notes that AMD is the market leader in CPUs for data centers and projects its revenue to triple to over $104 billion by 2028. Although Parkev calculates a fair value of $381, which is below the current market price of $546, he recommends it as the better buy compared to Intel due to its 7.56% return on invested capital and massive growth potential in Agentic AI.
Reasoning: Parkev states that Intel is significantly overvalued, with a market price of $113 compared to his fair value estimate of $50. Parkev points out Intel's negative return on invested capital of -2.05% and a more modest revenue growth forecast of $73 billion by 2028 compared to its peers.