AMD vs. Intel Stock: Candidate for Better Semiconductor Wrap

Perhaps Intel’s biggest problems, however, stem from its Foundry segment, which has been a major drag on results. The company has been pouring money into this business through capital expenditure (capex) and the construction of new production facilities. However, the segment has consistently been a big money loser, including an operating loss of $5.8 billion last quarter, or $2.7 billion if a non-cash impairment is excluded.

Following the departure of CEO Pat Gelsinger, Intel has said it may consider spinning off its foundry business. The company recently received $7.86 billion in direct financing and a 25% investment tax credit from the government to further expand its U.S. manufacturing footprint.

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

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

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

It’s no surprise that the company has been the subject of takeover rumors. There are many hidden physical assets that are not reflected in the stock price, not to mention the direct financing and tax incentives from the government.

AMD, meanwhile, has certainly been the stronger of the two companies, although it hasn’t gotten the respect from investors it deserves. If more AI infrastructure focuses on AI inference, this could be a good place. Meanwhile, investors shouldn’t overlook the CPU business, which is gaining market share in both data centers and PCs.

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

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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool holds 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 one disclosure policy.

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