The semiconductor industry has been one of the industries that thrived last year due to increased demand for consumer electronics, such as personal computers and smartphones. The semiconductor demand increased significantly from the booming electric vehicle (EV) industry as well. The rise in demand and the global semiconductor chip shortage increased prices, helping semiconductor stocks gain significantly over the past year. While new production capacities are rapidly opening due to massive government and private investments that could normalize demand, the supply shortage may not end anytime soon. According to a trade credit insurer Euler Hermes report, semiconductor sales are expected to grow by 9% in 2022. Therefore, both Intel Corporation (INTC)  and NVIDIA Corporation (NVDA) should benefit.

INTC designs, manufactures, and sells essential technologies for cloud, innovative, and connected devices. Its segments include its Data Center Group; Internet of Things Group; Mobileye; and Non-Volatile Memory Solutions Group. NVDA operates worldwide as a visual computing company. It operates in two segments, Graphics and Compute & Networking. Its products are used in gaming, professional visualization, data center, and automotive markets.

NVDA has experienced 31.5% gains over the past three months and INTC has risen 2.6% in the same time frame. Which of these two stocks is a better buy now? Let’s find out.

Latest Developments

On January 4, 2021, INTC at CES 2022 announced the world’s fastest mobile processor, bringing its performance hybrid architecture to mobile platforms for the first time with new 12th Gen Intel Core mobile processors that are up to 40 percent faster than the previous generation mobile processor. This could lead to rising demand for the company’s product.

On January 4, 2021, NVDA set out the next direction of the ultimate platform for gamers and creators, unveiling more than 160 gaming and Studio GeForce-based laptop designs and new desktop and laptop GeForce RTX GPUs and technologies. Jeff Fisher, senior vice president of consumer products at NVDA, said, “GeForce RTX is transforming gaming and opening up vast digital worlds. Today’s announcements further establish GeForce as the ultimate platform for gamers and creators.”

Recent Financial Results

INTC’s non-GAAP revenue increased 5% year-over-year to $18.10 billion for the fiscal third quarter, ended September 25, 2021. The company’s non-GAAP net income came in at $7 billion, representing a 54% year-over-year increase. Also, its non-GAAP EPS was $1.71, up 59% year-over-year.

NVDA’s revenues increased 50% year-over-year to $7.10 billion for the fiscal third quarter ended October 31, 2021. The company’s non-GAAP operating income grew 70% year-over-year to $3.39 billion, while its non-GAAP net income came in at $2.97 billion representing a 62% year-over-year increase. Also, its non-GAAP EPS came in at $1.17, up 60% year-over-year.

Past and Expected Financial Performance

INTC’s revenue and EPS have grown at CAGRs of 4.3% and 17.3%, respectively, over the past three years. Analysts expect INTC’s revenue to decrease 1.3% for the quarter ending March 31, 2022, and 0.3% next year. The company’s EPS is expected to decline 38.1% for the quarter ending March 31, 2022, and 29.9% next year. However, its EPS is expected to grow at a 3.2% rate per annum over the next five years.

On the other hand, NVDA’s revenue and EPS grew at CAGRs of 25% and 20.1%, respectively, over the past three years. The company’s revenue is expected to increase 28.4% for the quarter ending April 30, 2022, and 19% next year. Its EPS is expected to grow 28.6% for the quarter ending April 30, 2022, and 20% next year. Also, NVDA’s EPS is expected to grow at a rate of 39.4% per annum over the next five years.

Profitability

INTC’s trailing-12-month revenue is 3.23 times what NVDA generates. However, NVDA is more profitable, with gross profit and net income margins of 64.40% and 33.81%, respectively, compared to INTC’s 56.27% and 26.89%.

Furthermore, NVDA’s ROE, ROA, and ROTC of 41.94%, 15.93%, and 18.34% are higher than INTC’s 25.63%, 9.18%, and 11.90%, respectively.

Valuation

In terms of forward non-GAAP P/E, NVDA is currently trading at 63.23x, which is 505.1% higher than INTC’s 10.45x. Moreover, NVDA’s 61.15x forward EV/EBITDA ratio is 781.1% higher than INTC’s 6.94x.

So, INTC is relatively affordable here.

POWR Ratings

INTC has an overall rating of A, which equates to a Strong Buy in our proprietary POWR Ratings system. In comparison, NVDA has an overall C rating, which translates to Neutral. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

INTC has an A grade for Value, which is consistent with its 7.13x forward P/CF, which is 69.2% lower than the 23.14x industry average. However, NVDA has a D grade for Value, which is in sync with its 63.88x forward non-GAAP P/E, which is 176% higher than the 23.14x industry average.

INTC has a grade of C for Stability, in sync with its beta of 0.52, while NVDA has a Stability grade of D in sync with its beta of 1.31.

Of the 99 stocks in the A-rated Semiconductor & Wireless Chip industry, INTC is ranked #8. In contrast, NVDA is ranked #66.

Beyond what I have stated above, we have also rated the stocks for Sentiment, Momentum, Quality, and Growth. Click here to view all the INTC ratings. Also, get all the NVDA ratings here.

The Winner

The semiconductor industry is expected to grow exponentially with the rising demand for advanced technologies. And while both INTC and NVDA are expected to benefit, we think INTC is a better investment now because of its stable nature and higher profit margin.

Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Semiconductor & Wireless Chip industry here.

INTC shares rose $0.05 (+0.09%) in after-hours trading Tuesday. Year-to-date, INTC has gained 8.56%, versus a -1.10% rise in the benchmark S&P 500 index during the same period.

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.

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