AMD vs. Intel: The Race for the Tech Throne
Introduction
Take a good look at that computer under your desk or that laptop propped up that you’re using to read this article, and imagine the massive machine 100 years ago doing the same millions of tasks as the laptop, but as big as 3 apartment complexes. I’d like to believe that in 2024 almost everyone owns a computer, whether that be for work or playing games. As a result of this increased consumption of technology, we don’t question IF we have a computer we question WHICH computer. We now shape our budget not to simply buy a computer, but also for the quality and type of computer as well. When making these decisions, purchasing a CPU with care is the most important task we have.
An Intro to the CPU
The CPU or the Central Processing Unit is the brain of the computer. Essentially a circuit plugged into the motherboard reads instructions from the memory, and sends signals throughout the computer to execute them, just like how your brain receives input from the environment and sends signals throughout your body to respond. The CPU is made of a two inch ceramic square with a silicon chip inside and thousands of almost microscopic gold plated pins that control the inputs and outputs to the CPU, with each pin usually signaling billions of specific functions, data, or operations simultaneously.
One way to distinguish these powerful CPUs, is to look at how many tasks it can complete in one cycle, or the CPU’s Gigahertz. Along with this, the amount of cores or designated micro circuits in the integrated circuit of the CPU also play a role in its performance. Having more cores, a CPU can process more instructions aiding in things like performance and multitasking. Similarly its RAM (Random Access Memory) access plays a pivotal role in running large programs, multiple software, etc.
- Note: CPUs are not only used in PCs but also in devices like servers that provide resources and information to other devices over a connection. Additionally there are multiple types of processors, such as those used in phones, them commonly known as ARM processors. Also GPUs(Graphics Processing Unit) are different kinds of processors, different from CPUs in that they usually have less memory and less powerful cores, but instead focus on processing high volumes of information at high speeds and rendering high resolution visuals. GPUs are also often associated with gaming and processing very demanding games and software, however in some cases when computer programs are more lightweight, GPUs are not even needed and the CPU itself can handle the load.
AMD — Intel SWOT clash
As evidently introduced by the title, AMD and Intel have been and still are two of the most dominant chip manufacturers competing fiercely in the tech industry. To dive deeper into this economic rivalry, let’s conduct a SWOT analysis for both companies to deduce which one is really better.
Intel’s Strengths
Intel’s dominance has continued for more than 25 years since its inception in 1968, still being named the largest chip manufacturer in terms of sales and revenue. This dominance is due to two factors: clientele and reputation. Intel’s long list of clients includes Dell, IBM, Lockheed Martin, Verizon, and many more, leading to a consistent stream of revenue and new growth opportunities for the company. Intel is also known as one of the most reliable and quality chips on the market which gives the company leverage over its biggest competitors.
AMD’s Strengths
With many introductions to new technologies like the x86 processor back in the 90s and recently the Ryzen processors in 2017, AMD has been taking the lead in the market in different areas displaying their commitment in innovation and development. Similar to Intel, AMD also holds major partnerships being the chip provider for Sony and Microsoft’s gaming consoles — the Play Station 5 and Xbox Series X both have the 7nm AMD Zen 2 processor — not only allowing them to gain market share in the CPU market, but also allowing them to create a diverse product set ranging from laptop and desktop processors. Along with this, AMD has focused on making their processors energy efficient, shining new light on AMD’s spot in the chip market and granting more success financially.
Intel’s Weaknesses
Intel has been the leader of sales in the chip market for years, however one area of operation they lack in is production. As a result of Intel’s recent overproduction, the enterprise has been seeing a steady drop in market share and thus losing profits since early 2000s. Along with having limited reach in developing locations, Intel finds it hard to expand their production capabilities and hence their business as a whole. Intel also has largely failed at successfully entering the mobile industry. Another weakness is that Intel’s failure of entering the mobile industry. Because of this failed opportunity, Intel lost much of their market share and fell behind in the semiconductor chip market to companies like Qualcomm who were able to enter the mobile industry.
AMD’s Weaknesses
Similarly, AMD faces limitations from the mobile industry, as previously mentioned being dominated by Qualcomm and Apple. Along with this, AMD has faced property rights issues with lots of legal action despite having strong patents leading to much disruption and unnecessary losses. For example AMD lost up to 12.1 million in 2015 due to falsely claiming the number of cores their Bulldozer CPUs contained. Being dependent on outsourced manufacturing from third-party enterprises (mostly TSMC), AMD is vulnerable to supply chain issues like delays or inventory management leading to reduced customer satisfaction displaying production inefficiencies. Not only does AMD heavily rely on third party manufacturers, but also on a select few customers. AMD’s chips are primarily consumed by other big companies, being Sony and Microsoft. If these companies decide to switch suppliers, then a AMD’s revenue and investment potential would also likely take a huge hit.
Intel’s Opportunities
Intel has a multitude of opportunities at in its hands currently, with the potential to expand its production capabilities, market diversification, and sustainability. With the emergence of many new markets, for example, artificial intelligence, autonomous vehicles, drones and GPT software, there is a lot of potential for new revenue streams and economic growth. Additionally, Intel’s expansion to emerging markets like India and China for development could increase economic growth for the company in untapped markets. While simultaneously expanding its production capabilities and revenue streams, Intel’s push for sustainability could give it a leg up on its competitors.
AMD’s Opportunities
Similar to Intel, AMD can utilize emerging markets like those based around AI and machine learning to gain more streams of revenue. Already having established relations to gaming companies like Xbox and Ps5 allows AMD to expand with those companies as they shift to new Virtual Reality and Augmented Reality products. With a continued increasing demand for laptops and computers, AMD will continue to see involvement in the industry and has the potential to push their new products — like their high-quality EPYC server processor chip — to a wider range of customers.
Intel’s and AMD’s Threats
Very similar to their respective weaknesses, AMD and Intel share similar threats in their industries. As a result of increasing saturation in the CPU market, Intel and AMD are both vulnerable to low barriers of entry where they not only face each other and other big companies like Nvidia and Qualcomm but also new entries such as ARM processors and others. Additionally, both companies depend on a certain few customers that provide large quantities of their revenue, creating a risk under any economic fluctuations and volatility in the cyclical market, as fluctuating demand cycles, pricing pressures, inflation, currency fluctuations, or shifts in global trade policies can directly affect each firm’s revenue. Both AMD and Intel must continuously innovate in order to meet the rapidly changing industry standards, creating processors optimized for scalability, power efficiency, and connectivity.
Comparative Stock Analysis
Which chip company is better to invest in? Let’s start by breaking down how each company is doing. With the boom of AI, many new companies are rushing in to grab as much profit and expand their business as much they can. The unfolding of OpenAI’s ChatGPT has started to call for increased demand in the chip industry(more for GPUs than CPUs). Although Intel took repeated hits to their profits in 2021 losing up to 45% of their shares, and also lost relations to Apple who switched from Intel’s processors to their own silicon chips, they are seeing new light in the AI industry where they are designing their own Gaudi 3 AI GPU’s with many promises on better power efficiency and inference.
Along with this, Intel is better at producing more of their own designs in house than outsourcing to third party manufacturers. Their new Intel Foundry model posted their first quarter 2024 earnings with revenue falling 10% to $4 billion but significantly better improvement on their previous years $7 billion dollar losses. The new model also projects to see $8-$10 billion saved by 2025 and non-GAAP gross margins of 60%.
Conversely, AMD has seen their shares go up 68% and returns up 46.94% in the last year alone. In the last decade, AMD’s stock has gone up nearly 1000%. Along with becoming the exclusive supplier of chips to Sony and Microsoft, and their new next gen gaming consoles, AMD has also beaten wall street journal’s predictions by $20 million with their revenue going up 2% year-over-year. Like the rest of the pack, AMD wants a piece of AI as well, launching their own AI GPUs and Ryzen Pro 8000 for laptops and desktops attempting to rival Nvidia’s own booming GPUs. AMD’s clientele has also been on the rise, attracting big names to their chips like Oracle, Microsoft, and Meta, increasing their CPU sales income by 85% which could be speaking of growth in the future.
Additionally, AMD’s stronger cash flows compared to Intel (AMD with a $1 billion dollar free cash flow versus Intel’s negative $12 billion cash flow) is pivotal during this period of heightened demand for CPU and GPU processors. This advantage positions AMD to capitalize more effectively on market opportunities and invest in innovation, solidifying its competitive edge in the semiconductor industry. However, shifting focus to the better value stock than better tech stock, Intel shows more promise having a significantly better P/S and P/E ratio.
However while both companies are industry leaders and imperative in the AI push, both companies are trading at extremely high P/E multiples. As both companies trade above the average processor industry P/E multiple of 22x, it’s likely that both companies are overvalued currently. If an economic setback occurs or investors lose confidence in either company in the short term, the companies could be more attractive investment opportunities for the future.
Conclusion
Both companies are some of the greatest chip manufacturers among the whole world, and have been the main players of the market for years. Almost like a fight between two siblings, these two companies launch new processors back and forth at each other trying to gain a competitive advantage. AMD vs Intel is not only a rivalry that allows potential financial gain for investors but it is also a fascinating brawl of innovation and competition in the tech industry, yielding intriguing investment potentials for the two companies.
Disclaimer: Neither I nor anyone at Financial Fluency are professional financial advisors; this content is for entertainment and educational purposes only. Remember to invest at your own risk.
Thank you so much for reading this article. If you want to read more content like this, feel free to check out our publication using this link.
