As the world’s leading graphics card makers and the ones dominating all sales, Advanced Micro Devices (AMD) and Intel (INTC) are among the worst-performing stocks, having declined 34% and 47%, respectively, over the past year. Failing to keep up with the Joneses tends to undermine a company’s share price, to be sure. However, despite the bleak share price performance in recent months, one of these GPU giants has the potential to turn its fortunes around in 2025.
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AMD and Intel are legacy semiconductor companies that have competed neck and neck for as long as personal computers have been around. However, there is an essential difference between the two.
AMD is a fabless chip designer that outsources manufacturing to companies like TSMC (TSM). Intel, on the other hand, has a foundry business, which has been an unprofitable venture for the chipmaker and one of the reasons for its decline. Both make chips for personal computers, data centers, and other use cases.
I am bullish on AMD because it is successfully taking market share from Intel and making progress on the data center front. It is also more attractively priced at current levels. Likewise, I am bearish on Intel because of its lack of execution and deteriorating market share.
AMD is Closing the Quality Gap With Intel
While Intel has led the PC market and still holds a majority share, it has started losing ground to AMD because the latter offers better products. According to data from Mercury Research, AMD has grown its x86 client CPU market share from 11.6% in 2018 to 23.9% in 2024, while Intel has seen its share decline from 88.4% in 2018 to 76.1% in 2024. It’s not just the client CPU market where Intel is losing share to AMD; it’s also losing share across desktop, mobile, and server CPUs.
Given the gradual shift of power, AMD’s sales are growing, while Intel’s sales are on a downward trajectory. Intel has seen its trailing 12-month revenue decline from $71.9 billion in 2019 to $53.1 billion in 2024, while AMD’s TTM sales have grown from $6.7 billion to $25.7 billion over the same period. AMD’s Ryzen processors are winning against Intel’s offerings, and I see this trend continuing as the company delivers better products to the market.
In Q4 2024, AMD’s client segment grew 58% year over year, while Intel’s registered a 9% decline. Again, when comparing both companies’ profits and cash flow, AMD is the clear winner because it offers better products and lacks a loss-making foundry business.
AMD’s Winning in the Data Center Business, But Not So Fast
Data centers are another area where AMD and Intel are trying to compete nowadays. However, both aren’t as popular as the AI accelerator kingpin Nvidia (NVDA). AMD’s MI300 Series accelerators are more popular than Intel’s Gaudi series, but both fail to resonate with clients as well as Nvidia’s H100 series.
In Q4 2024, AMD generated $3.85 billion in sales from its data center segment, up 69%, while Intel generated $3.4 billion, down 3% year over year. For context, Nvidia’s data center revenue in Q3 2024 was $30.8 billion. However, AMD has a chance to make further inroads into the data center industry. In its most recent earnings call, AMD management provided several interesting updates regarding the market’s adoption of its MI300 accelerators.
Meta Platforms (META), Microsoft (MSFT), and IBM (IBM) are using AMD’s chips in their products, and the company has received favorable customer responses for its MI350 chips. AMD is also stepping up its AI integration, an important detail to pay attention to. Nvidia’s chips are currently the gold standard because of its CUDA libraries. If AMD can offer up its proprietary technology that rivals NVDA, it could become a viable alternative, but I do not see it dethroning NVDA completely. In chipmaking, there is room for more than one market giant.
After its recent decline, AMD trades at around 24x its forward earnings, while Intel trades at a forward P/E of 46x. Clearly, AMD is the better-priced option offering relatively better value.
Is Intel or AMD a Better Stock?
On Wall Street, AMD stock carries a Moderate Buy consensus rating based on 24 Buy, 11 Hold, and 1 Sell ratings over the past three months. AMD’s average price target of $148.03 per share implies a 31% upside potential compared to current levels.
Meanwhile, the verdict on INTC is somewhat different. The chip stock carries a Hold consensus rating based on one Buy, 25 Hold, and five Sell ratings over the past three months. INTC’s average price target of $21.98 per share implies an 11% downside potential compared to current levels.
And the Winner Is…
While AMD and Intel are both laggards in the semiconductor space, I see AMD as a promising turnaround story with plenty of market share it can realistically target (and capture). The smaller of the two chip giants is actively winning greater market share from Intel within client computing and making better progress on the data center front, as reflected in the company’s improving market performance.
Moreover, AMD offers investors a lower step on the chip ladder and, therefore, higher returns further down the track if and when the chip market equalizes and allows for greater market competition than just two Californian tech giants. If I had to choose between the two stocks to add to my portfolio, I would opt for AMD.
