Semiconductor stocks took even more damage than the broader market, thanks to what certainly seems like a perfect combination of macro headwinds. Supply chain disruptions, a looming economic contraction and other shorter-term issues have sent chip stocks tumbling at this point. Nonetheless, in this article, we’ve used TipRanks’ comparison tool to provide an overview of the two chipsets – Nvidia (NASDAQ: NVDA) and Intel (NASDAQ: INTC) – which may be the most intriguing to investors looking for a bounce. In terms of analyst forecasts, NVDA looks better. However, let’s dig deeper.
Nvidia and Intel are semiconductor stocks on opposite sides of the spectrum. Although both stocks are under heavy selling pressure, Nvidia remains one of the more expensive (and exciting) games, while Intel looks very cheap amid ongoing struggles to claw back some of the share. of market that it has lost over the years.
Without a doubt, Nvidia is a fallen winner still at the forefront of GPU innovation, while Intel seems to be losing ground to the competition. With the broader tech scene dragged down, investors may wonder whether it’s better to go for the hard-hit but still “expensive” leader or pay the lowest price for an underdog in the hopes that he can close the gap.
Nvidia stock is down about 64% from its all-time high of around $346 per share. Nvidia’s growth story is still very much alive. In fact, it may have improved over the past year as stocks have fallen. Although Nvidia is leading the charge for chipmakers, with a foot in the door on so many tech trends (think AI and the Metaverse), the valuation was suspect. It may still be suspect today, even after losing around two-thirds of its value from peak to peak.
Now, Nvidia stock deserves a premium over the peer group. Its incredible founder and CEO, Jensen Huang, has found a way to raise the bar in the industry. As many technology trends continue to evolve, Nvidia’s growth rate could exceed estimates by many. Indeed, it’s hard to gauge what demand will look like five years from the end of the recession and new technology trends (think wider adoption of video games and mixed reality headsets).
Indeed, Nvidia is a forward-thinking growth game with a hard-to-understand long-term growth rate. It’s hard to put a figure on Nvidia’s 10-year growth rate when emerging technology areas could drive demand steadily over time.
At this point, Nvidia stock is at 33.4x earnings and 10.4x sales. That’s not too expensive for one of the most impressive secular growth companies. Although higher interest rates and recessionary issues that diminish demand could weigh more on the stock in the medium term, I think Nvidia is one of the names worth hiding on a radar.
What is the price target for NVDA stock?
Wall Street remains bullish on Nvidia, with a “Moderate Buy” rating. NVDA’s average share price target of $199.83 implies a 68.1% upside from current levels. Undoubtedly, Nvidia’s price target has come down a lot in recent months. However, I think Wall Street is right to stand with the company amid transient macro headwinds.
Intel is a chipmaker whose shares have fallen more than 62% from peak to peak. Without a doubt, Intel has lost some of its edge in recent years. With the economy poised to take a hit, there are fears that Intel will come under pressure from all sides. Weak PC demand and waning dominance could pave the way for significant margin compression.
Undoubtedly, supply-side challenges could evolve into a glut of inventory. Although the short-term future looks bleak, Intel is confident it can close the gap with its CPU rivals. The company is spending considerable sums to create a foundation which it hopes can help it regain some of its market share.
In August, Intel co-invested in an Arizona-based manufacturing plant that should help the company fuel its “IDM 2.0” strategy. CEO Pat Gelsinger is confident the strategy can help Intel turn the tide in its favor. The market is mostly skeptical, and I think it is right.
At 5.8x earnings and 1.6x sales, Intel is a high-value stock that could offer huge rewards if Intel can make meaningful headway in 2023. The huge dividend yield of 5.6% makes it tempting to bet on the chips underdog.
What is the price target for INTC shares?
Intel shares have been slapped by numerous downgrades lately. Overall, Wall Street remains cautious here, with a “Hold” rating. INTC’s average stock price target of $35.17 implies a rich return of 30.4% over the coming year.
Conclusion: NVDA seems like a better choice
Wall Street seems to think it’s better to go with Nvidia’s favorite than Intel’s underdog. I am inclined to agree. Given the pace of innovation, it is very difficult to take a step back in semiconductors.