AMD vs. Intel Stock: Better Semiconductor Turnaround Candidate

Perhaps Intel’s biggest woes, though, stem from its Foundry segment, which has been a big drag on its results. The company has poured money into this business through capital expenditures (capex), building out new manufacturing facilities. However, the segment has been a consistently large money loser, including reporting a $5.8 billion operating loss last quarter, or $2.7 billion when excluding a noncash impairment charge.

Following the exit of its CEO Pat Gelsinger, Intel has said it could look to spin off its foundry business. The business recently received $7.86 billion in direct funding and a 25% investment tax credit from the government to continue to build out its manufacturing footprint in the U.S.

From a valuation perspective, Intel is the cheaper stock, trading at a forward price-to-earnings ratio (P/E) of 12.6 times versus 17.6 times for AMD.

However, if you separately value Intel’s core business and its foundry business, its valuation is even more attractive.

Intel’s foundry business has been losing lots of money, but it also has a lot of physical assets. Intel has spent $68.5 billion in capex, mostly on the foundry business, since the end of 2021 and has $104 billion in physical assets on its balance sheet. If you take just its recent capex spending and subtract out its $26 billion in net debt, its foundry business would be worth about $10 per share on 4.3 billion in shares. It also owns an 88% stake in Mobileye, which is worth about $11.4 billion, or $2.66 per Intel share.

As such, it is no surprise that the company has been the subject of takeover rumors. There are a lot of hidden physical assets not reflected in its share price, not to mention the government’s direct funding and tax incentive.

AMD, meanwhile, has certainly been the stronger of the two businesses, although it hasn’t gotten the investor respect it may deserve. If more AI infrastructure turns toward AI inference, it could be in a good place. Meanwhile, investors shouldn’t overlook its CPU business, which has been gaining share both in data centers and PCs.

I like both stock as turnaround candidates this year. I like Intel slightly more because of the deep value I think is still in the stock. However, AMD also looks like a solid rebound candidate. Fortunately, investors don’t have to choose and can add both stocks to their portfolios if they choose.

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $381,744!*

• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $42,357!*

• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $531,127!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

Learn more »

*Stock Advisor returns as of January 21, 2025

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, and Nvidia. The Motley Fool recommends the following options: short February 2025 $27 calls on Intel. The Motley Fool has a disclosure policy.

AMD vs. Intel Stock: Better Semiconductor Turnaround Candidate was originally published by The Motley Fool