The technology industry is booming after suffering a sharp recession in 2022. Advances in artificial intelligence (AI) have led to the release of OpenAI's ChatGPT, forcing countless companies to restructure their businesses in favor of generative technology. Excitement about AI has boosted the overall tech market, with the Nasdaq 100 technology sector soaring 75% since the beginning of last year.
Meanwhile, related industries such as virtual/augmented reality, cloud computing, automobiles, and e-commerce are gradually expanding, further accelerating the overall technology growth. As a result, it may be worth dedicating some of your holdings to the industry as it expands.
As major chipmakers, Intel (NASDAQ: INTC) and Advanced Micro Devices (NASDAQ: AMD) are two attractive investment options. These companies manufacture hardware that enables multiple technology areas, and demand for their chips is likely to increase as the industry develops.
So let's compare these two companies and decide whether Intel or AMD is the better technology stock right now.
intel
Intel's stock price hasn't moved much over the past decade, rising just 17%. The company has been in a slump, losing market share for central processing units (CPUs) to AMD and dissolving its more than 10-year partnership with Apple. Intel, once the chip industry's biggest player, has become complacent with its own technology, making it vulnerable to more innovative competitors.
However, Intel appears to be trying to turn things around and revamp its entire business model. Last June, the company announced a move to an in-house foundry model, which could make it rival Taiwan Semiconductor Manufacturing Co. as the largest semiconductor maker in North America and Europe.
Intel expects the new model to save $8 billion to $10 billion by 2025 and help it achieve non-GAAP (adjusted) gross margins of 60%. And it looks like business is already moving in the right direction.
On April 25, the company announced its financial results for the first quarter of 2024, including sales from the Intel Foundry division for the first time. The segment's revenue for the quarter was $4 billion, down 10% from a year earlier. Intel Foundry posted an operating loss of $2.5 billion, a significant improvement from the $7 billion loss a year earlier.
In addition to a new lineup of AI chips, Intel stock could be a good long-term choice as the company overhauls its business.
Advanced Micro Devices
Unlike Intel, AMD's business has grown explosively over the past decade, with its stock price soaring nearly 4,000%. The company's CPU market share rose from 18% in 2017 to 33% this year. Meanwhile, AMD achieved the second-largest market share in graphics processing units (GPUs), became the exclusive supplier of chips to Sony's PlayStation 5 and Microsoft's Xbox Series X|S in 2020, and is currently We are also trying out AI.
AMD announced its financial results for the first quarter of 2024 on April 30th. Revenue for the quarter increased 2% year over year and exceeded Wall Street expectations by $20 million. Earnings per share also exceeded expectations by $0.01. Still, AMD stock has fallen 3% since the earnings release. However, there was a lot to be bullish about in the long term for investors this quarter.
Over the past year, AMD has invested heavily in AI to develop GPUs that rival those of market leader Nvidia. And the company's focus on the market appears to be paying off. In Q1 2024, AMD's AI-centric data center division posted 80% year-over-year revenue growth, reflecting a surge in AI GPU sales. AMD has attracted major companies to its AI chips, with customers including Microsoft, Meta Platforms, and Oracle.
Meanwhile, client segment revenue, including CPU sales revenue, increased 85% to $1.4 billion. This increase represents an improvement in the PC market and is likely to drive growth for the foreseeable future.
Which is a better tech stock: Intel or AMD?
Data by YCharts
This chart shows that Intel is arguably a better value stock with a significantly lower forward price-earnings (P/E) and sales-to-sales ratio (P/S) than AMD. These are useful metrics. In both cases, the lower the number, the better.
However, the question here is not which stocks have better value, but which tech stocks are better. In this case, you should choose AMD. The company partners with companies across the industry to supply hardware for a variety of platforms and devices. And it seems to be expanding even faster in AI.
On the other hand, AMD's free cash flow was $1 billion compared to Intel's minus $12 billion, suggesting that AMD's financial position is good. It's true that AMD stock trades at a premium compared to Intel, with a significantly higher forward P/E ratio. However, its position in the technology sector is more stable and feels like a more reliable investment option.
Should you invest $1,000 in Intel right now?
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Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool's board of directors. Dani Cook has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Meta Platforms, Microsoft, Nvidia, Oracle, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: Long January 2025 $45 Calls on Intel, Long January 2026 $395 Calls on Microsoft, Short January 2026 $405 Calls on Microsoft, and $47 May 2024 Calls on Intel. It's a short call. The Motley Fool has a disclosure policy.
