Early last month, Advanced Micro Devices (AMD) looked like it would overtake Intel (INTC) by market
capitalization. INTC stock eventually rallied, although it pulled back like AMD. Which is a better buy?
AMD recently closed its Xilinx acquisition. Intel refreshed its PC chip line with Alder Lake. Unexpectedly,
Intel has a better-priced CPU that is widely available.
AMD is supply-constrained. It is fabless and has no chip fabrication plants. This business strategy worked
before and raised margins. These days, constraints show no sign of easing. China locked down Shanghai
at the start of the month. Russia’s invasion of Ukraine limited the supply of Neon, a key raw material for
chip manufacturing.
Valuations
Intel is a cheap stock. It always traded at a discount to AMD’s stock price. Intel also pays a $1.46 share
annual dividend. This cushions the stock from any major selloff. AMD’s shrinking debt is a positive
development. But AMD stock does not pay a dividend. Investors could buy Nvidia (NVDA) or Qualcomm
(QCOM) and get a modest dividend.
AMD and Intel are both vulnerable to underperformance. The technology sector is in a bear market.
Chip stocks will fall more as markets anticipate a sharp slowdown in demand. Investors should consider
both AMD and INTC stock on weakness. They are competing with each other, creating better products
that benefit consumers.
