Should You Consider Intel Over Nvidia for Your Tech Investments?

Many investors have been captivated by the remarkable growth of semiconductor designer Nvidia (NVDA -3.00%). As a leader in hardware for the artificial intelligence (AI) surge, Nvidia's sales and profits have been soaring. In 2024 alone, the stock climbed 171%, and it has increased over 720% since OpenAI launched the Nvidia-powered ChatGPT system in 2021.

Investor excitement surrounding Nvidia is palpable, with many believing its business will continue to thrive. However, this enthusiasm may have its limits. Some analysts argue that Nvidia's rapid stock price increases already reflect numerous years of expected high growth. As a result, Nvidia could be facing a potential price correction or may experience more modest gains in the next few years.

While there is no suggestion to completely overlook Nvidia, it's important to assess other investment options as well. A closer look at semiconductor giant Intel (INTC -3.67%) might reveal why this company can be a better investment at present.

Intel's Recent Challenges

Intel has encountered significant hurdles over the last few years. Leadership instability, with notable turnover in the CEO position, alongside fierce competition from rival Advanced Micro Devices (NASDAQ: AMD), has led to Intel losing market share across crucial segments. Additionally, the company that was once dubbed "Chipzilla" has struggled to capitalize on the growing AI market.

As a result, Intel's stock price has plummeted 71% over the past five years, currently trading at a mere 1.5 times its trailing sales and 20 times projected earnings for the upcoming year. These valuation metrics seem cheap when viewed historically and look even more attractive compared to the much higher ratios of AMD and Nvidia.

Simply put, the market appears to be pricing Nvidia's stock for ideal performance while labeling Intel's stock as nearly disastrous. Intel's current market valuation even lies below its book value, raising concerns as if investors believe it might be more beneficial for Intel to cease operations, liquidate assets, and return cash to shareholders.

Intel's Vision for the Future

However, this negative perception of Intel seems myopic.

The semiconductor veteran is effectively transforming its business model, involving plans to invest around $100 billion in building domestic chip-making facilities over the next five years. This ambitious strategy aims to elevate Intel into a leading third-party chip manufacturer with most operations based in America. This is particularly significant as the global tech sector's heavy reliance on manufacturing in Taiwan may not be sustainable over time.

Moreover, Intel's new chip foundry business has already attracted interest from major tech players, including Microsoft (NASDAQ: MSFT). Even Nvidia is contemplating transferring some chip orders to Intel, leveraging its U.S.-based manufacturing and independent supply chain, which offers an advantage over resources available to the leading global manufacturer, Taiwan Semiconductor (NYSE: TSM).

Ultimately, Intel is not the same chip maker it used to be—the revamped approach may prove invaluable in the long term.

Intel's Temporary Struggles Present an Attractive Buying Opportunity

I do not anticipate a swift turnaround for Intel in 2025 or even in 2026. The shift towards a foundry-focused strategy will necessitate time, compounded by the company currently operating under interim management.

That said, I prefer to maintain a long-term perspective. While Intel's stock may have been subject to significant price shifts amidst recent tumult, a 71% decline seems unwarranted. This situation does not merely depict a turnaround story but rather an overreaction from investors to Intel's transformative path. Therefore, I would rather invest in Intel's potential than buy more Nvidia shares at inflated prices. After conducting your research, you might arrive at a similar conclusion.

Intel, Nvidia, Semiconductors