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Intel vs. Nvidia Stock: Which is the Better Semiconductor Stock?

Nvidia has surpassed Intel as the largest semiconductor company by market cap. So let’s break down Intel vs. Nvidia stock.

Intel

A couple years ago, the financial media could not get enough of the story of Tesla’s (TSLA) market value soaring past traditional automakers such as Toyota, GM and Ford, or some combination of them. But when supercharged chip designer Nvidia’s (NVDA) market value surpassed semiconductor stalwart Intel (INTC), it went by with nary a notice. The latter might tell you more about both the market and technology in America. It also begs the question: if you had to choose only one of Intel vs. Nvidia stock, which is the better semiconductor stock?

Semiconductors are crucial and the most strategically important technology because they are the materials and circuitry needed to produce microchips that are at the heart of everything from smartphones to advanced satellites. You might think of these microchips as the brains inside all advanced technology.

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Semiconductor chips are in the spotlight because one of the areas that China is still relatively behind in is advanced chip technology, which runs across chip design, computer software and equipment. Washington’s chief concern is that while many of the advanced chips are designed in America, only around 12% of all chips are manufactured here, and they tend to be the less advanced chips produced in older plants.

Nvidia’s Surge in the Intel vs. Nvidia stock debate

Nvidia is riding the surge in demand for the more high-performance chips used in gaming. The company also expanded into data centers, with a $7 billion acquisition of Mellanox Technologies. NVDA is also gaining market share in artificial intelligence (AI)-focused chips and in cloud computing. These are all profitable, big-growth areas that have pushed Nvidia (well) past Intel in market value, as INTC stock has gone the other way.

It is important to note that Nvidia only designs its advanced chips, outsourcing production primarily to Taiwan Semiconductor (TSM), which fabricates more than half of the world’s chips.

Intel’s Stumble and Shake-up

Intel is a different animal than Nvidia in a few ways. First, it produces semiconductor chips for a much broader array of industries while still dominating its core PC and data-center markets. Intel has nine manufacturing facilities around the world leading to a reported $58 billion in net property, plants and equipment. Plus, being in business since 1969 has netted substantial intellectual property of manufacturing semiconductors.

Despite this experience, Intel has publicly stumbled in terms of the next-generation chip manufacturing process known as 7-nanometer technology, referring to the size of the transistors it produces (Intel’s offerings were anticipated to finally arrive in 2023 but that may be delayed even further). Chips that use smaller transistors can run more efficiently and use up less physical space.

This led the company to shake up its technology team overseeing its manufacturing operations, and it’s considering outsourcing more to foundries like Taiwan Semiconductor.

As you might guess, all this hit Intel stock pretty hard and it is woefully underperforming Nvidia in recent years. In the last five years, NVDA stock is up 219%, while INTC shares are down 36%.

Of note, INTC shares have actually outpeformed in 2022, largely owing to years of underperformance and NVDA’s heightened valuation before the growth stock sell-off.

Intel vs. Nvidia Stock: Which is the Better Buy?

It seems a no-brainer to go with Nvidia in the Intel vs. Nvidia stock debate, since NVDA seems to have unbeatable momentum in this critical industry at the heart of advanced technology.

Now consider geopolitical risks. The chief risk for Nvidia is its dependence on Taiwan Semiconductor for production. Taiwan Semiconductor is a powerful company in a strategically important place so it has to diplomatically balance both customers and countries. For example, roughly 14% of its sales go to Huawei, and the U.S. Commerce Department has stipulated that companies would require licenses for sales to Huawei of semiconductors made abroad with U.S. technology. Although this briefly interrupted sales, Taiwan Semiconductor received the license and resumed sales. However, this highlights the unique political risks that potentially weigh on a company that doesn’t do its own manufacturing.

Which stock to buy now in the Intel vs. Nvidia stock debate depends on your time frame. Momentum traders should go with Nvidia stock if the burgeoning uptrend develops strength. But if you’re considering a more contrarian, potentially undervalued company, I would go with Intel.

And if you want more stock recommendations, my Cabot Explorer advisory has been researching the global tech battleground and currently has several promising technology stocks in the portfolio that I really like. To learn their names, click here.

What’s your perspective on the debate of Intel vs. Nvidia stock? Which one do you invest in and why?

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*This post has been updated from an original version, published in 2020.

Carl Delfeld is a member of the Cabot investment team, and chief analyst of Cabot Explorer.