It is undeniable that NVIDIA Corporation (NASDAQ: NVDA) has been one of the greatest wealth creators in the last decade. Forget graphics chipsets the company used to be known for. Now NVIDIA is dominating the AI space and demand for its Blackwell architecture and chips (and prior offerings) is literally off the charts. But looking forward to stock gains ahead of earnings season, does that make NVIDIA better for investors than Intel Corporation (NASDAQ: INTC) and Advanced Micro Devices Inc. (NASDAQ: AMD)? And what about the mighty Apple Inc. (NASDAQ: AAPL)?
Investing in stocks solely how they are going to do in a single earnings season does not constitute long-term investing. Buy many investors are also traders — and being a “Strategic Bull” means you will go for your gains wherever they come from. This review here is not meant to be any recommendation by Oggonomics to buy or sell any of these stocks ahead of earnings season. We do still want to look at the flip-side of the coin that most investors are currently looking at.
How much of a gain is too big of a gain, even for NVIDIA? Oggonomics firmly believes that the Efficient Market Hypothesis doesn’t hold up all that well (at best) over time. Otherwise, NVIDIA’s stock price wouldn’t have risen over 150% so far in 2024 alone — and the “Efficient” part of the hypothesis doesn’t really add up if NVIDIA is up more than 30-times in just the last five years. Yet here we are just before earnings season and those massive gains are quite real.
Good investors look forward rather than just looking at what’s happened in the past. So, what happens if and when investors decide that the past performance was too one-sided? Intel’s stock and its story have been hampered for years. It had recovered to about $50 earlier in 2024, but its earnings-related news was so bad that the stock fell to just under $30. Again, not very much proof of “efficient” by the market.
Now, immediately before earnings season kicks off, Intel’s stock has rallied 15% in the last two weeks. After a 5% gain on Friday, its shares were back up to $35.00 in late-day trading and that is still well under the $39.73 consensus analyst target according to Finviz.
One analyst report should never be the sole catalyst to buy (or sell a stock). That’s even more true if you haven’t heard of the firm. Melius Research analyst Ben Reitzes issued a report this week predicting that Apple, AMD, and even Intel should all shine as AI-winners in the second half of 2024. His view is that some companies may have to slow spending down at the AI infrastructure winners (like NVIDIA and Broadcom) and rotate some of those IT-spending bucks into other technology companies like AMD and Intel.
Reitzes called out AMD as a “cleaner” way to play graphics chips powering AI servers. And AMD is pointed out as not having Intel’s foundry overhang. He also points out that Intel is under much more negative investor sentiment (or “much more unloved”) and could see a seasonal bounce. Reitzes has a $210 price target on AMD and he has a $37 price target on Intel’s shares.
Apple Inc. (NASDAQ: AAPL) was largely forgotten about during the NVIDIA boom. That has all changed since Apple’s release of its AI strategy. Apple was basically a $170 stock at the start of May, but Friday’s late-day price of $232 is a rally of more than 36% in just over two months. Reitzes’ view is that the upcoming iPhone launch may lead to an iPhone super-cycle posting 20% revenue gains for the next couple of years. And even after a huge gain in the last two months, his $260 Apple price target still implies more than 10% upside ahead.
Finding analysts who want to talk up the likes of Intel is no easy challenge. Intel was among the most hated of the S&P 500 stocks and it led the worst-performing Dow stocks in 2024. Intel’s stock performance was bad enough that it was actually put (admittedly, quite reluctantly) on the list of the 9 Best Dow Stocks for the Rest of 2024.
AMD shares were at $210 as recently as March, but by April and May the shares had dipped to under $150. Those brief panic-selling share prices have so far demonstrated themselves to be wonderful buying opportunities. AMD’s stock was up over 2% at $186.50 late on Friday — that’s a gain of well over 15% just so far in July and up and an even more impressive 30% since the lows of May.
Meanwhile, the big question is what’s in store for NVIDIA when it reports earnings in August. Intel’s earnings report and AMD’s earnings report will have already come and gone when NVIDIA reports in mid-August.
It would seem that if the earnings reports contain more disappointments then both AMD and Intel shares would have to give back some of those gains. Wall Street often gets ahead of itself when hoping for recoveries and turnarounds. Then again, the NVIDIA analyst upgrade brigade keeps throwing out higher and higher price targets for NVIDIA.
AMD is currently valued at $300 billion and Intel’s valuation is down to $150 billion. The $131.00 share price and $3.2 trillion market cap of NVIDIA makes the AI-leader now worth more than 7-times a combined Intel/AMD.
NVIDIA is forecast to have about $120 billion in revenues this year (Fiscal 2025) and over $162 billion next year (Fiscal 2026). Fiscal expectations for AMD are about $25.5 billion this year and $32.7 billion next year, with views for Intel revenues coming in at $55.8 billion this year and $62.6 billion next year.
It is fair to ask what happens to all of these stocks if an alternative scenario arises. NVIDIA shareholders have grown completely unaccustomed to any negative surprises. And what happens if AMD and Intel manage to recover some of their lost luster? It is very possible in the quarters or years ahead that Intel and AMD offerings prove to be cheaper in a “good enough considering the discount” scenario if capital spending budgets and IT-spending budgets become tighter. Intel does have its own foundry and it is expected by some to grow software revenues as well.
Oggonomics does not try to incorporate the Efficient Market Hypothesis into its forecasts and expectations. Too many memories of it not working at all makes it a hard lesson to get over. In no way should any of these comments and views be considered investment advice. The alternative scenarios have not even come to fruition yet. And how you choose to invest should be 100% of each investor and their financial advisor.
