Like many football fans, I’ve sometimes wondered what would happen if you pit the best college team against the worst NFL team. Of course, due to legal issues and other concerns, such a match-up will probably never occur. However, we have something similar with Intel (NASDAQ:INTC) and Advanced Micro Devices (NASDAQ:AMD).
Currently, both semiconductor firms are scheduled to release their third-quarter earnings reports in quick succession: Intel will release after the close of Oct. 24, while AMD will follow on Oct. 29. With fears associated with the almost always shaky U.S.-China trade war weighing on the technology sector, neither INTC stock nor AMD inspire the greatest of confidence.
Since the second half of this year, both equity shares have slogged through the past six months. In particular, AMD has gone virtually flat, gaining only half a percent. And while Intel stock has gained over 8%, it took stakeholders on a wild ride to get there.
Thus, this backdrop presents an interesting choice: do you go with the indomitable college team (in this case, AMD) or the uninspiring worst team of the world’s best football league (Intel stock)?
In the nearer term, I’d argue the game day match-up is 50/50. With so much China uncertainty, semiconductors are focusing on taking or defending market share. For instance, Intel is planning to launch a competitively priced graphics processing unit next year. Simultaneously, this will give AMD something to think about as well as provide upside impetus for INTC stock.
Of course, AMD won’t take that lying down as they’re one of the top GPU specialists. Thus, the immediate picture is cloudy. However, extend the time frame and you can’t help but feel bullish on Intel stock.
New Wave of Computer Tech Benefits INTC Stock
With the chip wars, advocates on all sides tend to think in myopic and granular terms. Given that semiconductors are serious business, I have no interest in throwing my two cents in this arena.
Yet despite raging debates about which company produces the best chips, we can all agree on one thing: this is an expensive industry. Furthermore, a paradigm-shifting announcement will almost surely make this sector even more costly. Ultimately, this benefits well-heeled investments like Intel stock.
Just recently, internet giant Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) made a breakthrough in quantum computing. Utilizing a next-generation processor, Alphabet’s quantum computer resolved a problem that would take a traditional supercomputer 10,000 years to solve.
Critics pointed out that Alphabet’s achievement was a singular, narrowly focused test. And to be fair, its quantum computer doesn’t have immediate practical applications due to complexity and cost, among other factors. But as tech researcher Hartmut Neven countered, this was a Sputnik moment for Alphabet. “Sputnik didn’t do much either. It circled the Earth. Yet it was the start of the space age,” Neven said.
While Alphabet rightfully is taking the credit for this development, quantum computing has positive implications for the entire tech industry. Right now, a concept called Moore’s Law stymies semiconductors. Essentially, with traditional processing units, a semiconductor can only get so small before it becomes a physical impossibility.
Thanks to a successful test of quantum computing, though, the industry can potentially set aside Moore’s Law. However, the heavily resourced names like INTC stock are likely to enjoy the most benefits.
Last year, INTC spent $13.5 billion in research and development, while still delivering $21 billion in net income. In contrast, AMD spent $1.4 billion and delivered $337 million. Obviously, this is a sharp divide.
Intel Stock Better Positioned for Future Innovations
Although Intel has always outgunned AMD in terms of resources, it didn’t matter under the current paradigm. Because of Moore’s Law, massive investments into semiconductor tech have yielded declining returns. Plus, AMD’s smart strategies have allowed them to leapfrog bumbling Intel in certain areas.
But with the potential start of a new age of quantum computing, it made fundamentals great again. That’s because Intel has considerably more financial resources to plow into this and associated innovations. Keep in mind that Alphabet spent more than a decade developing their quantum computer.
That’s a lot of time. From Intel’s perspective, they can split their resources toward new innovations, while still forging a path with traditional platforms. Unfortunately, AMD and similarly sized semis lack that capability. Thus, if you’ve got a long-term time frame, INTC stock is the better play.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
