Arm Holdings and Intel are two of the largest chipmakers in the world. Arm specializes in designing mobile CPUs and licenses its designs to other chipmakers, while Intel is an integrated device manufacturer that designs, manufactures, and markets its own chips. Arm’s flexible approach and low-power designs have allowed it to dominate the smartphone chip market, while Intel has struggled to keep up with Arm-based chipmakers in the mobile device space.
Arm went public again in September, seven years after being acquired by SoftBank. Its stock price has more than tripled since its IPO, while Intel’s shares have fallen by around 20% over the same period. Arm’s outperformance can be attributed to its dominant position in the smartphone chip market and its efforts to expand into new sectors such as cloud and automotive.
Arm’s revenue growth has been driven by its expansion into these faster-growing sectors, as well as the demand for its AI-optimized chip designs. The company expects continued growth in revenue and earnings in the coming years, fueled by its expansion into the mobile, cloud, and artificial intelligence markets. However, at its current valuation, some analysts believe that Arm’s stock may be overpriced.
In contrast, Intel has faced challenges in the CPU market, losing market share to AMD and struggling to keep up with TSMC in the process race. The company’s revenue has declined over the past few years due to sluggish PC sales and competition from AMD. Intel is working to upgrade its own foundries to catch up with TSMC, but the costly expansion effort is impacting its operating margins.
Analysts expect Intel’s revenue and profit to increase in the coming years as the PC market stabilizes and it ramps up shipments of its new chips. However, Intel’s stock is not seen as a bargain at its current valuation and the company recently cut its dividend. While there is potential for growth if Intel can catch up with TSMC, some investors may be cautious due to these factors.
Overall, if a choice had to be made between Arm and Intel, some analysts prefer Arm due to its faster growth, wider moat, and high-margin business. Intel still has challenges to overcome, such as catching up to TSMC and improving its competitive position in the market. Both companies face uncertainties in the ever-evolving semiconductor industry.
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https://www.fool.com/investing/2024/07/05/better-chip-stock-arm-holdings-vs-intel/
