Nvidia, Intel or AMD: Which stock has the best prospect?
We examine each US computer chip maker's stock price outlook and fundamentals in this article.
Last week’s tech stock sell-off, which saw the NASDAQ-100 Technology Sector Index plunge by as much as 8.8%, also took down US chipmakers Nvidia, Intel and Advanced Micro Devices (AMD) by 16%, 6% and 18% respectively.
Despite this latest correction, analysts still see stock price upsides for all three companies over the next 12 months.
Below, we take a closer look at what top investment brokers have to say about each stock.
Share price target (average): US$544.70
Last traded price (04 September): US$501
Return potential: 8.7%
Nvidia (NASDAQ: NVDA) has an average 12-month share price target of US$544.70 from 37 analysts polled by Bloomberg, as of Tuesday 08 September 2020.
Last month, Bank of America analysts raised their price targets on the Nvidia stock to US$600 from US$520 following its better-than-expected Q2 earnings, while reiterating their ‘buy’ rating.
This represents an upside of 19.8% from Friday 04 September 2020’s closing price of US$501 a share.
In their note, the analysts also made an outlandishly bullish prediction, stating that Nvidia – whose market cap surpassed Intel’s in July – will reach a US$500 billion market cap, based on various growth scenarios.
‘Bigger picture, we believe NVDA has an unassailable hardware/software/developer lead in some of the largest and fastest growing markets in semis/tech,’ the researchers wrote.
As such, they raised their profit forecasts for the firm’s 2020, 2021 and 2022 fiscal years by 10%, 14% and 11% respectively.
Despite the optimistic outlook, the brokers did caution that the ‘lumpy’ data centre business, alongside a worsening of US-China trade tensions, also means Nvidia’s path to a half-trillion valuation is not without its challenges.
Meanwhile, Deutsche Bank (DB) is the most bearish of the latest analyst ratings, giving the stock a price target of US$450 and ‘hold’ rating on 19 August 2020.
DB analysts wrote that while positive fundamental momentum is expected from the Q2 results, they believe that ‘much of this goodness is already reflected’ in NVDA’s share price.
Share price target (average): US$61.94
Last traded price (04 September): US$50
Return potential: 23.88%
Intel (NASDAQ: INTC) has an average 12-month share price target of US$61.94 from 42 analysts as of Tuesday 08 September 2020, based on data collated by MarketBeat.
Intel shares rose nearly 3% last Wednesday 02 September – a day before the big tech sell-off – after the company unveiled its 11th Gen Intel Core processor for thin and light laptops.
Following the launch, Wells Fargo analyst Aaron Rakers said that the new processors are a positive step for Intel, and should help to make it more competitive with AMD in the mobile market.
He reiterated an ‘Equal Weight’ rating and US$55 price target on Intel in the same note.
Credit Suisse analyst John Pitzer last month reiterated an ‘outperform’ rating and price target of US$70 on the Intel stock.
His original price case was made after the company announced a restructure of its Technology, Systems, Architecture and Client Group into five separate organisations each reporting directly to Bob Swan.
‘While the decision is likely to be well-received internally and underscores a culture of accountability, it will also likely reinforce how abruptly/unexpectedly events have unfolded,’ he wrote.
He added in the same note that while there are many more unknowns than knowns from his vantage point regarding the reorganisation (‘hence the risk of us being overly presumptuous is high’), he sees ‘significant value in splitting up the company (a la AMD 2009) between design and manufacturing’.
‘Unfortunately, until the company establishes a clear strategy, uncertainty will rule the day,’ he concluded.
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Advanced Micro Devices, Inc. (AMD)
Share price target (average): US$77.93
Last traded price (04 September): US$81.50
Return potential: -4.4%
Advanced Micro Devices (NASDAQ: AMD) has an average 12-month share price target of US$77.93 from 32 analysts polled by Bloomberg as of Tuesday 08 September 2020.
Of the three semiconductor stocks discussed in this article, AMD is the only one whose share price is trading below consensus price targets with a downside of minus 4.4%.
Goldman Sachs analyst Toshiya Hari raised his price target on AMD to US$84 from US$50, while maintaining a ‘neutral’ rating.
He wrote that AMD’s ‘strong’ product roadmap execution has led to meaningful share gains across its product lines, adding that ongoing process node migration issues at Intel should contribute to further market share gains.
However, Hari believes the stock's risk/reward appears ‘balanced at current levels’. His latest price case represents a potential 3.1% upside from AMD’s last traded price of US$81.50 on 04 September 2020.
Meanwhile, Deutsche Bank priced the stock at a target of US$75 per share alongside a rating of ‘hold’ earlier last month.
‘Overall, taking a step back from our modelling tweaks, we acknowledge the bigger picture that AMD’s market share gain story is becoming much clearer in light of Intel’s 7nm missteps, which creates a bull case narrative for higher market share in the next 3-5 years,’ DB analysts wrote.
‘However with the stock trading at ~50x of our CY22 estimate, we feel that the bull case is appropriately priced in.’
Nvidia, Intel or AMD: Which stock is worth investing in?
Based on the estimated return potential in the next 12 months, Intel appears to be the frontrunner with analysts predicting a nearly 24% upside on the stock.
Nvidia, at an estimated upside of 8.7%, could also witness more healthy gains in the coming months.
However, investors interested in AMD should certainly consider the fact that the stock is currently trading under its peak market value, based on its last closing price.
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