The feud between computing giants Advanced Micro Devices and Intel has been a saga for the ages. For the majority of its history, Intel held dominion as the world’s premier semiconductor company, towering over its arch-nemesis. But as tides turned, Intel fell from grace while AMD ascended, emerging as a pacesetter in the CPU and GPU arena. This dynamic shift propelled AMD to oust Intel in terms of stock performance over the past half-decade.

However, the seismic landscape of technological warfare continues to evolve with the impending rise of artificial intelligence – a catalyst that will exponentially augment chip demand, a boon to all industry players. Furthermore, under the stewardship of CEO Pat Gelsinger, Intel’s resurgence in imbibing enhanced chips and rebranding itself as a manufacturer has set the stage for a compelling question: Could Intel stage a comeback as the superior investment?

The Ongoing Duel

The recent CES 2024 spotlight failed to cast much illumination on the never-ending skirmish between these juggernauts. At the event, AMD concentrated heavily on GPUs and APUs, while Intel unveiled fresh lineages of CPUs catering to desktops, laptops, and even automobiles.

Despite groundbreaking inroads made by Intel in late 2023 to outpace AMD’s CPUs, selecting the “optimal” CPU now hinges more on fiscal constraints and individual requisites rather than a direct preference for either company.

Furthermore, Intel unveiled its forthcoming Battlemage GPU – still in the embryonic stages and slated for a 2024 release – marking its recent foray into GPUs, contrasting AMD’s substantial head start in this semiconductor niche under the stewardship of CEO Lisa Su when she orchestrated AMD’s rebirth in the mid-2010s.

Another point of stark distinction between AMD and Intel resides in their production capabilities. As a fabless design company, AMD customarily outsources chip production to the likes of Taiwan Semiconductor and other entities. In stark contrast, Intel continues to manufacture most of its designed chips, leveraging its refurbished production infrastructure to cater to clients like Amazon and Cisco. As the largest chip manufacturer in the U.S., Intel’s nimble in-house production endows it with a competitive edge.

A Financial Faceoff

The semiconductor industry weathered a recent downturn, rendering financial metrics for both companies less compelling. Despite the industry headwinds, AMD emerged as the tempo setter, evinced by its less precipitous decline in revenue compared to Intel’s. In the first three quarters of 2023, AMD garnered net revenue amounting to $16.5 billion, marking an 8% dip from the corresponding period in 2022. However, a 4% upswing in Q3 hints at a budding recovery.

Conversely, Intel grappled with a more severe setback, witnessing a 21% year-on-year plunge in its $39 billion revenue for the first three quarters of 2023. The company’s revenue also contracted by 8% in Q3, signifying an absence of industry convalescence.

Furthermore, Intel bore the brunt of its financial distress with a negative $12 billion free cash flow in the initial three quarters of the year as a result of its multibillion-dollar investments in nascent fabs, albeit a significant amelioration from the $24 billion deficit in the corresponding year-ago period. This journey to the black was further accentuated by a $943 million free cash flow in Q3, signaling a potential nadir.

When juxtaposing P/E ratios, AMD’s P/S ratio of 11 times sales notably trumps Intel’s meager 4, underpinning AMD’s robust financial standing and arguably justifying its premium valuation.

AMD or Intel?

Amid this dichotomy, more conservative investors would purportedly incline towards AMD. Under Lisa Su’s tutelage, the company exhibited a predisposition for notching technological supremacy, thus making it a prime beneficiary in the impending surge in chip demand.

Conversely, Intel beckons as a speculative investment proposition, leveraging its stature as the preeminent fab company in the U.S., having garnered a clientele of foremost chip design companies. Its resolute measures to refurbish its chip framework attest to a resolve in recapturing lost technical ground, thereby amplifying its prospects, especially in light of the semiconductor sector’s tepid valuation.