The semiconductor industry is poised for long-term growth and expansion, mainly due to the potential of AI. However, the industry is currently facing headwinds, and I think it would be wise to wait for a better entry point in Intel Corporation (INTC) and NVIDIA Corporation (NVDA) as these stocks look overvalued at their current prices.
The Semiconductor Industry Association (SIA) reported that global semiconductor sales were $43.2 billion during the month of July 2023, down 11.8% year-to-year.
However, its long-term prospects look bright as the global semiconductor market is expected to grow at a 9.2% CAGR until 2030.
Moreover, the global artificial intelligence chip market is anticipated to increase at a CAGR of 38.2% to $383.70 billion by 2032. Factors such as increased demand for smart homes, the development of smart cities, and the emergence of quantum computing are driving the rise of the.
However, owning overpriced stocks includes the possibility of significant losses if the market corrects or the company’s financial performance falls short of expectations. Also, overpriced stocks may have limited upside potential because their high valuations may already reflect optimistic future growth forecasts.
In light of these encouraging trends, let’s look at the fundamentals of the two Semiconductor & Wireless Chip stocks, beginning with number 2.
Stock #2: Intel Corporation (INTC)
INTC develops, designs, manufactures, promotes, and distributes computing and associated goods worldwide. It operates in the Client Computing Group; Data Center and AI; Network and Edge; Mobileye; Accelerated Computing Systems and Graphics; Intel Foundry Services; and other segments.
INTC’s forward EV/Sales of 3.42x is 26.7% higher than the industry average of 2.69x. Its forward EV/EBIT of 73.40x is 311.3% higher than the industry average of 17.84x.
During the fiscal second quarter that ended July 1, 2023, INTC’s revenue amounted to $12.95 billion, down 15.5% year-over-year. Its non-GAAP net income and EPS decreased 52.4% and 53.6% year-over-year to $547 million and $0.13, respectively.
However, its total assets came in at $185.63 billion for the period that ended July 1, 2023, compared to $182.10 billion for the period that ended December 31, 2022. Its total current liabilities came in at $27.18 billion, compared to $32.16 billion for the same period.
The consensus revenue estimate of 58.92 billion for the year ending December 2024 represents a 12.3% increase year-over-year. Its EPS is expected to grow 188.8% year-over-year to $1.80 for the same period. INTC’s shares have gained 35.7% over the past nine months to close the last trading session at $36.34.
INTC’s POWR Ratings reflect this mixed outlook. INTC has an overall C rating, translating to a Neutral in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
INTC has a C grade for Value, Stability and Quality. Within the Semiconductor & Wireless Chip industry, it is ranked #55 out of 92 stocks. Click here for the additional POWR Ratings for Growth, Sentiment, and Momentum for INTC.
Stock #1: NVIDIA Corporation (NVDA)
NVDA propels computation to tackle complex computational problems. Its Compute & Networking arm entails a data center accelerated computing platform, automotive AI cockpit, and advanced networking, whereas the Graphics segment offers GeForce GPUs for gaming, PC, gaming platform solutions, and more.
NVDA’s forward Price/Sales multiple of 19.87 is 657.4% higher than the industry average of 2.62. Its forward EV/EBITDA of 38.24x is 169% higher than the industry average of 14.22x.
NVDA’s net revenue for the second quarter ended July 30, 2023, increased 101.5% year-over-year to $13.51 billion. Also, its non-GAAP net income and non-GAAP EPS came in at $6.74 million and $2.70, up 421.7% and 429.4% year-over-year, respectively.
However, its total current liabilities came in at $28.80 billion for the period that ended July 30, 2023, compared to $23.07 billion for the period that ended January 29, 2023. Its total liabilities came in at $49.56 billion, compared to $41.18 billion for the same period.
Analysts expect NVDA’s revenue to increase 100.6% year-over-year to $54.10 billion for the year ending January 2024. Its EPS is expected to grow 224.1% year-over-year to $10.83 for the same period. It has surpassed EPS estimates in three of four trailing quarters. Over the past year the stock has gained 225.2% to close the last trading session at $435.20.
The stock has an overall C rating, translating to a Neutral in our POWR Ratings system. NVDA is ranked #29 in the same industry. Beyond what is stated above, we’ve also rated NVDA for Growth, Sentiment, Momentum, Stability, Value and Quality. Get all NVDA ratings here.
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NVDA shares were trading at $435.29 per share on Wednesday morning, up $0.09 (+0.02%). Year-to-date, NVDA has gained 197.96%, versus a 17.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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