The CES conference has been an annual event dating back to 1967 to highlight new technology. CES has premiered key new innovations like VCRs, DVDs, and Microsoft’s (NASDAQ:MSFT) Xbox, among others. Analysts look to the conference for key guidance on where leading tech firms are heading. At their recent CES 2020 presentations, Intel (NASDAQ:INTC) and AMD (NASDAQ:AMD) offered sharply different perspectives on the next year.
This year’s reviews are in. According to the analysts, AMD scored high marks, while Intel had a more hit-or-miss showing.
I’d argue there was a lot to like with Intel’s presentation as well, particularly as it speaks to Intel’s ability to move beyond the core CPU chip business. Don’t listen to those saying to sell Intel stock because of its CES 2020 presentation.
AMD: Moving Ahead In Chips
Advanced Micro Devices made it clear during its presentation that its main focus remains taking back more share from Intel. AMD announced a large number of new product offerings for both computing and graphics Tuesday.
AMD is going after the whole market. For power-hungry desktop users, AMD announced the ultra-high end Threadripper 3,990x which conveniently will retail for $3,990. For more mass market customers, AMD will be launching a number of chips for laptops and mobile as well.
Analysts gave AMD high marks for being clear with its timetable and pricing for all its new chip launches. That’s in stark contrast to Intel. As you may know, Intel faced product delays and shortages throughout much of 2019, and has given less clear guidance for its 2020 roadmap of product releases.
All told, AMD gave a clear and on-message presentation. AMD successfully fended off a dark period in its history a few years ago and is back in the game with its most competitive products against key rivals like Intel and Nvidia (NASDAQ:NVDA) in a decade. AMD has a strategy, and they’re sticking to it. As long as the execution remains strong, AMD may be able to continue proving the skeptics wrong.
Intel: Looking Beyond the PC
If you were looking to Intel’s CES 2020 presentation for more details about its plans in the PC space, they did give some color there. Intel discussed its next generation chips, and also offered more color on the upcoming Tiger Lake mobile line of products. Intel also provided more details on its new standalone graphics chip, the DG1.
In general, however, Intel spent most of its time on things that go beyond its bread and butter lines of business. For example, Intel offered a demonstration of its 3D athlete-tracking technology. This is set to be used at the 2020 Olympics, along with various other Intel technologies, giving the company a ton of free press going forward.
Intel’s presentation also featured a lot of cool products from partner companies such as Samsung and Adobe (NASDAQ:ADBE). The Adobe feature showed how Photoshop uses Intel-powered artificial intelligence to help simplify difficult photo editing tasks. There was also some excitement on the hardware side, with innovative products such as foldable laptops that can work as either one giant screen or two smaller ones.
Beyond that, Intel also discussed the latest developments in its other R&D efforts such as the Mobileye autonomous vehicle department, and the company’s efforts in 5G roll-out. Some analysts panned Intel’s presentation as unfocused or meandering. That’s a valid take. But Intel’s presentation really highlights how far the company has come from just being a commodity chip vendor. The company has built a robust technological platform that goes well beyond the personal computer, and you’ll see it more in things such as the 2020 Olympics.
Advanced Micro Devices Stock and Intel Stock: Differing Valuations
In looking at the reactions to CES 2020, it’s interesting how much of it fits the recent stock price narrative. AMD stock has been soaring, so analysts are pleased that AMD is pressing straight ahead on its chip business. Intel stock hasn’t been as strong a performer. As a result, Intel gets criticized for showing its long-term vision across various product classes rather than just sticking to computing chips.
Over the long-term, though, valuations matter. Intel stock is selling for 13x earnings. AMD is selling for nearly 250x trailing earnings. Even if you use analysts (optimistic) forward earnings, AMD is selling for almost 50x next year’s number. Perhaps AMD will continue to out-execute Intel over the near-term.
But with Intel selling at a bargain price, throwing off tons of free cash flow, and paying a solid dividend, it’s the clear value pick of the two. Intel may not have the most exhilarating product line-up for 2020, but it’s building a strong array of new products for the next decade.
The Bottom Line
AMD is giving Intel a solid fight within the core computing chips business. The company is actually nearing its highest market share in many years. But Intel retains more scale and a far larger R&D budget. Don’t expect AMD to be able to maintain this unusually competitive stance forever.
Meanwhile, Intel is already developing its next generation of products that will bring it strong revenues from a wide variety of technologies including the Internet of Things, 5G, and self-driving vehicles. AMD is still fighting the last war while Intel has moved onto future challenges.
While AMD is putting up a strong effort now, expect Intel to produce stronger returns over time, particularly since its valuation is much more compelling now.
At the time of this writing, Ian Bezek owned Intel stock. You can reach him on Twitter at @irbezek.
