The bear market is harshest in the technology sector. Markets are only willing to pay a valuation premium when growth exceeds the average. The economic slowdown in 2023 created big discounts on AMD, Intel (INTC), and storage supplier Western Digital (WDC).
AMD has a competitive disadvantage. Its latest desktop processor, the 7x00 series, costs too much for customers. The entirely new platform requires DDR5, which is more expensive memory. It needs a pricey motherboard, too. Furthermore, the CPU has fewer cores than that offered by Intel.
AMD is not competitive until after CES 2023. It will need a 5800x3D design on the 7000 series to attract buyers.
WDC sells a commodity. Storage costs keep falling. In addition, demand for more storage will slow as customers and corporations delay purchases. WDC may only increase storage density at lower costs. This is not a positive catalyst.
Intel is best positioned. Alder Lake CPU offered more performance and value than AMD’s aging chips. Raptor Lake is even better. Markets are betting against Intel. They do not assign any upside to its recent Mobileye (MBLY) spin-off.
Watch Intel from here. The stock is discounted at an 8.3x P/E.
