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Late last week, Intel's (INTC) horrible earnings report led chip stocks lower - but simultaneously opened up new avenues for its competition. After Intel's lackluster quarterly earnings, some analysts believe the struggling semiconductor giant's industry rivals - including Advanced Micro Devices (AMD), Qualcomm (QCOM), and Taiwan Semiconductor (TSM) - can capitalize on its woes.
While Benchmark says the quarterly report suggests Intel is bleeding market share to AMD, QCOM's utilization of Arm (ARM)-based designs and TSMC's advanced manufacturing capabilities could give these rival stocks their own edge over Intel in the evolving semiconductor landscape. Here's a look at Intel's top competitors now.
#1. Advanced Micro Devices
Based in Santa Clara, Advanced Micro Devices (AMD) is one of the prominent leaders in the chip-making industry. The company manufactures and designs computer chips, GPUs, and advanced microprocessors, delivering high-performance solutions for gaming, data centers, and personal computing.
Valued at $214 billion by market cap, AMD is currently Nvidia's (NVDA) prime competitor in the artificial intelligence (AI) chip industry, especially in the high-end graphics processing unit (GPU) and advanced computing technology sectors. By focusing on competitive pricing, AMD positions its chips as appealing alternatives to Nvidia's more expensive options. This strategic pricing enables AMD to seize market opportunities and attract customers who seek powerful yet cost-effective solutions.
AMD specifically aims to develop AI-powered chips to compete with Nvidia's upcoming Blackwell, which may explain why AMD is one of the only mega-cap tech stocks to trade higher amid today's widespread selling; reports indicate that Blackwell's delivery is now delayed until early 2025 after a design flaw was uncovered late in production.
During the Computex conference in Taiwan, AMD's CEO Lisa Su revealed the new AMD Instinct MI325X accelerators, which will be launched in Q4 2024. These chips boast an industry-leading 288GB of ultra-fast HBM3E memory, enhancing AMD's competitive edge in generative AI performance.
AMD's role in the AI chip sector is expanding, contributing to a notable rise in its stock over the past year. AMD stock is up 17.5% over the past 52 weeks, despite slipping into negative territory on a YTD basis.
AMD's current valuation appears attractive, particularly following the recent correction. The forward price/earnings ratio of 39.24 is a discount to AMD's 5-year average, and the price/earnings-to-growth ratio is now below the 1 threshold, at 0.91.
On July 30, AMD reported a solid earnings print, delivering another strong top and bottom line beat in Q2. Its sales surged to $5.84 billion, surpassing Wall Street estimates of $5.27 billion, reflecting a 9% increase year over year (YOY). Data centers added a remarkable $1.6 billion to the overall growth. This segment saw a substantial 45% increase year over year, driven by strong demand for their EPYC processors and increased adoption in cloud computing and enterprise server markets.
On an adjusted basis, the company reported EPS of 69 cents, which is in line with consensus estimates and a 30% increase from the prior year's quarter. Gross margin improved from 49.5% to 53%, while free cash flow rose to $439 million.
For the full fiscal year 2024, analysts estimate EPS to reach $2.56, up 28% YoY.
Overall, Wall Street has a consensus "strong buy" rating on AMD, with the mean price target of $193.11 reflecting expected upside of 42.2% from the current price.
#2. Qualcomm
Based in California, Qualcomm (QCOM) is a well-established semiconductor and telecommunications company specializing in 5G technology and mobile computing advancements. The company develops high-performance, energy-efficient chip designs for a diverse range of applications, including mobile devices, PCs, automotive systems, wearables, robotics, and connectivity solutions.
Qualcomm's best-selling ARM-based chips meet the increasing demand for powerful yet efficient technologies, securing its role as a pivotal force in the evolution of wireless connectivity.
Valued at $177.8 billion, shares of QCOM have gained 30.6% over the past 52 weeks, but are now down roughly 31% from June's high of $230. This presents a potential "buy the dip" opportunity for savvy investors, with QCOM trading at a reasonable 15.8 times forward earnings - a substantial 30% discount to the sector median.
Furthermore, QCOM's dividend payment has consistently grown over the past 20 years. Its annual dividend stands at $3.40, reflecting a yield of 2.13%.
On July 31, QCOM posted robust Q2 earnings results, smashing Wall Street's estimates by significant margins. Revenue reached $9.3 billion, a 10% jump YoY, and beat estimates by $173 million, thanks to robust demand for its 5G chips and expanding presence in the automotive and IoT sectors.
Net income rose to $2.1 billion, up 16% from the year-ago quarter. On an adjusted basis, QCOM reported EPS of $2.23, which topped analysts' expectations by 7 cents.
Analysts tracking QCOM predict EPS rising 18% to $7.85 in fiscal year 2024, followed by 14% growth to $8.95 in fiscal year 2025.
Overall, Wall Street analysts are upbeat about QCOM's prospects, with a consensus "moderate buy "rating. The average price target is $210.10, which suggests nearly 33% upside potential from the current price.
#3. Taiwan Semiconductor Manufacturing Company
Based in Hsinchu, Taiwan Semiconductor Manufacturing Company (TSM) is a global leader in semiconductor manufacturing, specializing in advanced technology and high-quality chip production. These chips are used in various applications, including smartphones, high-performance computing, automotive electronics, and Internet of Things (IoT) devices. TSMC's innovations in 5nm and 3nm process technologies have set industry standards, enabling faster, more efficient, and more powerful chips. With a massive market cap of $777 billion, the company provides advanced chips to Nvidia, Apple (AAPL), and Qualcomm.
TSM stock is down 2% amid today's sell-off, but the shares are still up by more than 40% YTD. The shares are currently trading at 22.89x forward earnings, which is right in line with the sector median. However, the PEG ratio of 0.87 suggests TSM is a bargain at current levels, based on its expected growth.
On June 30, Taiwan Semiconductor reported robust quarterly earnings for Q2 2024, surpassing Wall Street's expectations for both revenue and profit. Sales soared to $20.5 billion, a 33% increase from the previous year, with 67% of revenue driven by advanced technologies. This surge reflects strong market demand and is likely to offset potential margin declines from the ramp-up of 3-nanometer technology, positioning TSMC for another earnings beat in upcoming quarters.
TSM reported EPS of $1.48, surpassing analysts' expectations by 11 cents.
Looking ahead, TSM's guidance for the current quarter projects revenue rising 32% YoY to a range between $22.4-$23.2 billion.
Analysts have taken a bullish stance on TSM stock, with a consensus rating of "strong buy." The stock is projected to have 40.1% upside potential, based on the average price target of $204.71.
