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I don't understand the stock valuations at all. I'm not a huge finance person, but Intel has a PE of <10 and pays a 3% dividend. AMD has a PE >40 and no divid

I don't understand the stock valuations at all. I'm not a huge finance person, but Intel has a PE of <10 and pays a 3% dividend. AMD has a PE >40 and no dividend. Intel has their own manufacturing capacity and hasn't done a terrible job of catching back up to AMD. I can see if there's worry about ARM eating into Intel profits, but that should affect AMD too. Toss in global politics with TSMC and Intel looks like a much safer bet long term. What makes AMD more attractive from an investment point of view? There's got to be some reasoning for it and I'd love to understand it.

nly 5y ago
A 40x P/E just shows the market pricing in the expectation that its AMDs earnings are going to continue to grow (probably by eating market share). Imho paying a dividend is a pretty bad sign in this industry - they should be funneling everything in to R&D. Their 10x P/E reflects a belief that their earnings are going to remain relatively stagnant. See these forward looking earnings estimates: https://www.marketbeat.com/stocks/NASDAQ/INTC/earnings/ https://www.marketbeat.com/stocks/NASDAQ/INTC/earnings/ https://www.marketbeat.com/stocks/NASDAQ/AMD/earnings/ https://www.marketbeat.com/stocks/NASDAQ/AMD/earnings/ That said, I'm with you, I'd rather be holding Intel in this market.
mhh__ 5y ago
AMD is a meme stock, that's basically it. Unlike most meme stocks however AMD is a good business regardless
ksec 5y ago
And you may be surprised that 80% of investor have absolutely zero understanding of any business. Looking at numbers is all they do. They may understand finance, but not business. Or at least their understanding are very shallow. Right now the bet, or at least the market suggest, Intel wont be able to catch up to TSMC in terms of technological leads, and even if they do, they wont be able to do it as cheaply as TSMC. x86 is being eroded by ARM, and even ARM are not safe from the Riscy Silver Bullet. The strange thing about the market in the past 20-30 years is how they view manufacturing and machinery as liability. For Intel without the technological moat ( in terms of leading edge ), Fabs are not viewed favourably by the market. Does it makes sense, of course not. But the the markets can remain irrational longer than you can remain solvent. Intel is advancing their work far quicker than I could expect. While catching up to TSMC is still a tall order, at least they are finally innovating. Instead of saying No to their Custom Foundry customers they are now being challenged to deliver exactly what their customer demands.
SturgeonsLaw 5y ago
Traditional stock valuations are completely out the window in this market, and will probably continue to be like that until the next major crash resets everything.
thawaya3113 5y ago
Intel’s manufacturing capacity has been holding them back. If there next node is everything promised, it will at best have reached parity after many years, and there’s plenty of reason to believe it will fall behind at least one of their fabbing competitors again. Also, it’s a massive risk. If, for whatever reason, there is a drop in chip demand (which is entirely possible with a global recession, which is looking increasingly likely) Intel will be burning billions keeping their manufacturing running. AMD, on the other hand, simply need to not place any more orders and offload the cost to TSMC and GlobalFoundries, etc. Also, dividends probably impact PE negatively. Big investors invest money in companies because they have done their research and believe those companies will do a better job with their money than other companies. The company giving them a dividend back simply means they need to figure out something else to do with that money, which logically should be to reinvest it in the same company (since it’s the one their research says will currently meet their objectives best). The dividend has simply added a lot of operational costs, and in many cases and in many cases taxes, for something that is completely unnecessary for them. Further, I suspect Intel is increasingly tying itself to the US, whereas AMD, while still heavily based in the U.S., isn’t doing that as much. If we do see a global technological schism, AMD will be able to straddle both sides in a way that Intel cannot.

nly 5y ago

A 40x P/E just shows the market pricing in the expectation that its AMDs earnings are going to continue to grow (probably by eating market share). Imho paying a dividend is a pretty bad sign in this industry - they should be funneling everything in to R&D. Their 10x P/E reflects a belief that their earnings are going to remain relatively stagnant. See these forward looking earnings estimates: https://www.marketbeat.com/stocks/NASDAQ/INTC/earnings/ https://www.marketbeat.com/stocks/NASDAQ/INTC/earnings/ https://www.marketbeat.com/stocks/NASDAQ/AMD/earnings/ https://www.marketbeat.com/stocks/NASDAQ/AMD/earnings/ That said, I'm with you, I'd rather be holding Intel in this market.

mhh__ 5y ago

AMD is a meme stock, that's basically it. Unlike most meme stocks however AMD is a good business regardless

ksec 5y ago

And you may be surprised that 80% of investor have absolutely zero understanding of any business. Looking at numbers is all they do. They may understand finance, but not business. Or at least their understanding are very shallow. Right now the bet, or at least the market suggest, Intel wont be able to catch up to TSMC in terms of technological leads, and even if they do, they wont be able to do it as cheaply as TSMC. x86 is being eroded by ARM, and even ARM are not safe from the Riscy Silver Bullet. The strange thing about the market in the past 20-30 years is how they view manufacturing and machinery as liability. For Intel without the technological moat ( in terms of leading edge ), Fabs are not viewed favourably by the market. Does it makes sense, of course not. But the the markets can remain irrational longer than you can remain solvent. Intel is advancing their work far quicker than I could expect. While catching up to TSMC is still a tall order, at least they are finally innovating. Instead of saying No to their Custom Foundry customers they are now being challenged to deliver exactly what their customer demands.

SturgeonsLaw 5y ago

Traditional stock valuations are completely out the window in this market, and will probably continue to be like that until the next major crash resets everything.

thawaya3113 5y ago

Intel’s manufacturing capacity has been holding them back. If there next node is everything promised, it will at best have reached parity after many years, and there’s plenty of reason to believe it will fall behind at least one of their fabbing competitors again. Also, it’s a massive risk. If, for whatever reason, there is a drop in chip demand (which is entirely possible with a global recession, which is looking increasingly likely) Intel will be burning billions keeping their manufacturing running. AMD, on the other hand, simply need to not place any more orders and offload the cost to TSMC and GlobalFoundries, etc. Also, dividends probably impact PE negatively. Big investors invest money in companies because they have done their research and believe those companies will do a better job with their money than other companies. The company giving them a dividend back simply means they need to figure out something else to do with that money, which logically should be to reinvest it in the same company (since it’s the one their research says will currently meet their objectives best). The dividend has simply added a lot of operational costs, and in many cases and in many cases taxes, for something that is completely unnecessary for them. Further, I suspect Intel is increasingly tying itself to the US, whereas AMD, while still heavily based in the U.S., isn’t doing that as much. If we do see a global technological schism, AMD will be able to straddle both sides in a way that Intel cannot.