AMD and Intel face premium valuations despite slower growth versus rivals

The Motley Fool··Read original
2▲3 ▼2Impact / 5
Summary · why it matters

AMD and Intel investors are sitting on massive gains over the past year, but the stocks now trade at premium valuations that may be hard to justify given their growth rates. AMD's data center division grew 57% last quarter while Nvidia grew 92%, and Intel's revenue rose just 7%. Both stocks carry forward price-to-earnings ratios far above the 25 to 30 times range that would be reasonable for their industries, meaning earnings must roughly triple starting in 2027 to bring valuations in line. The market appears to be pricing them as turnaround plays even though they remain behind competitors like Nvidia and Taiwan Semiconductor, which are still beating them and trade at more attractive levels.

Impact on assets 5

Semiconductors± Mixed
Intel Corporation
INTC
▼ NegativeCapitalrelevance

Premium valuation with only 7% revenue growth makes earnings targets unrealistic.

Artificial Intelligence± Mixed
Advanced Micro Devices Inc
AMD
▼ NegativeCapitalrelevance

Premium valuation with slower growth (57% vs Nvidia's 92%) makes earnings targets unrealistic.

NVIDIA Corporation
NVDA
▲ PositiveCompetitionDemandrelevance

Outperforming AMD and Intel with 92% data center growth and more attractive valuation.