Intel vs Nvidia stock: which is a better semiconductor asset?

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Intel (NASDAQ: INTC) and Nvidia (NASDAQ: NVDA) stock prices have diverged in the past decade. Nvidia has jumped by over 160% this year while Intel has crashed by over 32%. Intel is up by less than 10% in the past ten years while Nvidia has soared by over 26,800% in the same period.

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As a result, Nvidia’s market cap has jumped to a whopping $3.2 trillion while Intel is valued at $136 billion. In other words, Nvidia is now 147 bigger than Intel, a company that dominated the semiconductor industry for decades. 

Intel vs Nvidia stocks

Why Nvidia and Intel diverged

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Intel and Nvidia have moved in different directions in the past decade mostly because of innovation and execution.

Nvidia has proven to be a more innovative company in this period as it launched numerous products that became hits among users. One of its most innovative solutions is one that most people don’t know about: Cuda.

Compute Unified Device Architecture (CUDA) is a highly advanced software that enables GPU-accelerated computing and parallel processing. It has become a market leader in the industry by helping companies build AI solutions. 

Nvidia has become a leading GPU provider for companies in the AI, Bitcoin mining, and automotive industries. It has continued to generate substantial margins because it just designs its solutions and then Taiwan Semiconductor does the manufacturing.

Intel, on the other hand, has moved from one crisis to the other, which has seen it lose its market share to AMD and Nvidia. For example, the company postponed the launch of Meteor Lake, its 7nm chips, a program that cost it substantial sums of money.

Intel has embarked on a multibillion-dollar process of becoming a giant fabricator as it seeks to compete with Taiwan Semiconductor and GlobalFoundries. In March, it announced a $100 billion US investment in the next five years. It has also announced a $33 billion German investment and $25 billion investment in Israel. 

To be clear: Intel is not paying all these funds. Instead, it is relying heavily on government incentives as it seeks to become a key competitor to TSM. Ultimately, Intel will be a company that designs semiconductors and also manufactures them. 

I believe that fabless companies like Nvidia and AMD are better because they tend to have higher margins. Indeed, AMD has thrived after it spun off GlobalFoundries in 2009.

Intel vs Nvidia: best investment?

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Therefore, with Intel and Nvidia, we have companies that are at the opposite sides of the spectrum in terms of valuations. Intel is highly undervalued as it trades at a PE multiple of 25 while Nvidia has a multiple of 70.

Also, analysts believe that Intel has room to take market share in the AI GPU industry from Nvidia. It launched Gaudi 3 in April, a product it says is more power-efficient and runs faster than Nvidia’s H100 GPU. It also launched Xeon 6 AI Chip.

It is unclear whether the product will be successful but as I wrote on AMD, there are chances that it will become a small player in the industry. Besides, the industry is now going through supply challenges and robust demand. 

Therefore, in the next few quarters, I expect that Nvidia will continue to show robust growth as it did in the last quarter. This growth will help its stock continue beating other semiconductor companies, including Intel.

In the long term, however, I believe that, barring any execution challenges, Intel could double its valuation. Besides, Intel is valued at a bargain. For example, Intel generated over $54 billion in annual revenue in 2023 and a net profit of $1.6 billion. These numbers are significantly lower than the $71 billion and $21 billion it made in 2018. 

However, they are significantly higher than AMD’s $22.6 billion and $854 million in 2023. AMD is now valued at over $280 billion. 

The bottom line is that Nvidia is a good investment for now but Intel stock could rebound in the coming years as the turnaround continues.