The Nasdaq Composite The index is down nearly 25% year-to-date, and many semiconductor stocks have seen massive sell-offs during the 2022 trading session. In addition to concerns about the potential for a prolonged recession and other macroeconomic pressures affecting the broader market, manufacturing issues and other factors have caused The geopolitical risk is also in the exodus of investors from semiconductor stocks.
nvidia (INTC 2.31%) And the Intel Corporation (NVDA 2.84%) They are leading chip companies that have seen big sell-offs, and their shares are now trading at 40% and 53%, respectively, this year. Which of these semiconductor players is the best to buy amid today’s bear market conditions? Read on for different sayings from two Motley Fool contributors.
Nvidia has proven its ability to innovate
Parkive Tatefusian: A proven ability to innovate is one of the factors I rank highly when considering investing in a technology company. This means more than just developing one excellent product or service. It can be said that Nvidia has proven its innovation capabilities by frequently optimizing GPUs. These highly sought after computer chips power many of today’s car gaming consoles, servers, and cockpit monitors.
Strong customer demand drove Nvidia’s revenue from $4.1 billion in 2014 to $26.9 billion in its most recent completed year. Of course, sales boomed after the outbreak of the pandemic, as people invested in home offices and played more often, and local digital businesses needed more server capacity. Benefiting from the shift in consumer behavior, Nvidia has been selling its GPUs at premium prices, generating a gross profit margin of over 62% for three consecutive years.
In fact, Nvidia’s hard-to-replicate products have allowed the company to increase earnings per share at a compound annual rate of 32.3% in the past 10 years. Admittedly, Nvidia faces near-term headwinds as economies reopen and consumer behavior rapidly changes once again. Moreover, sales of Nvidia chips are closely related to cryptocurrency prices because they can help individuals earn digital assets.
those Two red flags for Nvidia Sales and profits may slow down over the next few quarters. However, long-term investors can seize this as an opportunity to acquire shares of this proven innovator at low prices.
Intel may be the safest stock in today’s turbulent market
Keith Noonan: Intel has been struggling due to weak demand, margins and competition from Advanced Micro Devices In the CPU core and server product categories. Admittedly, the company’s performance in the second quarter was very disappointing non-GAAP (Adjusted) Revenue decreased 17% year-over-year to $15.3 billion, and adjusted earnings per share decreased 79%. Meanwhile, Chipzilla barely has a growth-based valuation, and its shares are trading at 13.5 times expected earnings for the year.
Intel also pays big dividends, with a current yield of around 4.7%. Whether or not the company should eventually reduce its payments and focus resources on growth initiatives is a question that investors seem divided on, but its ability to support payment has improved thanks to the financing and financing options arising from CHIPS and the recently passed science represents. The stock’s high return could provide some buffer in the near term if volatility continues to disturb the broader market.
Intel prepares to improve its competitive position in key categories, and moves to secure early access ASML HoldingsNext-generation semiconductor manufacturing machines could indicate they have some promising chip designs that will help them start making a comeback in the next few years.
Chipzilla’s product pipeline looks weaker than Nvidia’s, and the recent business slowdown has been more dramatic, but Nvidia is still also trading at nearly 41 times expected earnings for the year and 12.6 times expected sales even after big sell-offs. Intel’s more conservative and transformative assessment could make it a better buy on the market today.
Which Semiconductor Stock Is Best To Buy?
Nvidia’s strengths in high-performance GPUs and chips that can be used for data centers, artificial intelligence, machine vision, and other applications have helped it grow very quickly and generate stellar profit margins in recent years. The company’s position in the semiconductor industry in general looks stronger than that of Intel, and Nvidia is probably a better stock for growth-oriented investors.
But if you’re concerned that the current Nasdaq bear market may continue for a while, Nvidia may have to drop further from its current valuation levels, and Intel might be a better buy. For investors who prefer investing in companies with more conservative value with the potential for turnaround, Intel is probably the better portfolio. This is the case when choosing between stocks should come down to your personal risk appetite and assess the relationship between each company’s valuation and growth prospects.
Keith Noonan He has no position in any of the mentioned shares. Parkiv Tatefusyan He has no position in any of the mentioned shares. Motley Fool has positions at ASML Holding, Advanced Micro Devices, Intel and Nvidia and recommends. Motley Fool recommends the following options: long calls in January 2023 worth $57.50 on Intel and $57.50 in January 2023 on Intel. Motley Fool has a profile Disclosure Policy.