World News – FI – The strong valuation of AMD Stock is difficult to justify


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The relationship between the Advanced Micro Devices (NASDAQ: AMD) and Intel (NASDAQ: INTC) stock becomes like that between Tesla (NASDAQ: TSLA) and General Motors (NYSE: GM)

As of October 7 opening price of nearly $ 86 per share, AMD had a market cap of nearly $ 100 billion on what is expected to be sales of $ 7 billion in 2020 Intel, meanwhile, was worth about $ 52 / share, $ 218 billion, on expected sales of $ 79 billion

The price-to-sales ratio is not as extreme as in the Tesla-GM example (GM is only worth a small fraction of its revenue), but the disparity is getting harder and harder to justify. especially true as Intel continues to bring a quarter of its revenue to the bottom line Intel’s growth and profitability appear to match AMD’s

So why do InvestorPlace writers like Matt McCall and Tyler Craig prefer to see you own AMD? There are reasons

The high end of the chip market has long been occupied by gamers, and they love AMD The company’s share in the Steam hardware survey continues to rise It is now 25%, which means a quarter of PC gamers now use AMD chips

Every New AMD Announcement Seems to Put Pressure on Intel AMD is planning an October 8 announcement on what it calls its “Vermeer” family of processors Pre-announcement testing shows these new chips are around 15% faster than equivalent Intel processors AMD’s 2021 line, combining graphics and processing on a single chip, would also be faster than what Intel offers

EPYC design for advanced server chips by AMD is also rapidly adopting by computer manufacturers They combine it with Nvidia graphics chips (NASDAQ: NVDA) for artificial intelligence applications

While Intel may be in AMD’s rearview mirror, Nvidia is way ahead of it With forecasted revenue of $ 13 billion in 2020, this company is worth $ 348 billion, or more than 25 billion dollars. times his income

Nvidia is ahead of AMD in graphics Its Mellanox transport fabric is entering cloud data centers And its ongoing purchase of ARM Holdings could make it as powerful as Intel has ever been Some analysts are now predicting the death of the x86 architecture on which Intel’s success is based, replaced by the ARM architectures of Nvidia ARM is working on chips with 192 cores, designs that could put Intel permanently in the shade

Nvidia and AMD have enjoyed a long-standing « frenemy » relationship, often cooperating on subsystems while competing fiercely in graphics.Once Nvidia shuts down on ARM, this could easily end as Nvidia will be in able to meet its own processor needs

It would be ironic if, after years of lagging behind Intel, AMD overcomes it to find itself miles behind Nvidia.But this is how it looks

The past few years have been marked by a frenzy for chip stocks with valuations that go on and on and beyond Nvidia’s current valuation makes no sense to me, and I recently pulled out money to invest in Intel

Fundamentals Matter However As good as Nvidia chips are, the company is not worth 25 times its revenue No company is I even find reason to question AMD’s valuation, 13 times revenue , 169 times last year’s revenue Both companies are also limited in production and depend on Taiwan Semiconductor (NYSE: TSM), their manufacturer, for their growth Even though Intel chips are second-rate, they have factories of manufacturing that can meet cloud sourcing and low cost production of a good enough product

But you’re not arguing with the Band Values ​​are what they are, not what you want them to be AMD stock is up 90% in 2020, while Intel is down 12 % A speculator should avoid Intel, but an investor approaching retirement can have it both ways Keep money in Nvidia or AMD and keep an eye on it Leave your Intel alone and take the dividends Balance will come with time and you’ll get profit anyway

Dana Blankenhorn has been a financial and technology journalist since 1978 Her latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on the technology available from the Amazon Kindle store Write to him at danablankenhorn @ gmailcom or follow him on Twitter at @danablankenhorn

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Global News – FI – AMD Stock’s skyrocketing valuation hard to justify



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