Comparing Nvidia and Intel Stocks: Identifying the Superior Investment Opportunity

Comparing Nvidia and Intel Stocks: Identifying the Superior Investment Opportunity

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With the huge wave of hype recently surrounding artificial intelligence, investor interest in chip manufacturers is as high as it has ever been. Nvidia (NVDA) and Intel (INTC) are among the biggest players in this space. NDVA, in particular, has been on a tear recently, as the graphics processing units it specializes in are especially useful in AI applications. INTC is more of a stalwart in the industry but has remained relevant since its founding in 1968. Which of the two is the better investment? Let’s take a look.

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Quality

While both companies are huge and likely to be financially stable, that doesn’t mean they are on equal footing. The Altman Z-Score is a financial measure used to determine the bankruptcy risk of a business – both NVDA and INTC have a Z-score high enough to garner a “safe” rating. Both companies also have about $7 billion in cash on their balance sheets. However, given that NVDA’s market cap is significantly higher, this indicates that INTC probably has a safer balance sheet.

Edge: INTC

Growth

A company’s future growth prospects are another important factor to consider before investing. You might expect NVDA to be the clear winner here, as its recent performance has been so impressive, and INTC is no longer considered a growth company — but that kind of outperformance is hard to maintain. Analysts expect NVDA to grow at about 36% per year over the next five years, which is certainly above average. However, analysts expect INTC to grow by 43% per year over the same period. Surprisingly, it looks like INTC has the best growth prospects in the near to mid-term.

Edge: INTC

Valuation

Probably the most important consideration when analyzing an investment is valuation – at the end of the day, the price you pay determines your return. Even an amazing business can be a bad investment at the wrong price. The most commonly used metric for publicly traded stocks is the price-to-earnings (P/E) ratio. The lower the ratio, the cheaper the stock, and all other things are equal. You might guess that high-flying NVDA is more richly priced than INTC, but this is another surprise. INTC is trading at a trailing twelve-month P/E ratio of 111.3 as of 3/6/24, while NVDA is trading at 74.6 over the same period. It’s worth noting that INTC is in the middle of a turnaround effort, so the market is pricing in the prospect of better earnings in the near future – nevertheless, NVDA appears to be the cheaper stock on paper.

Edge: NVDA

The Winner: INTC

Arguably, NVDA has the brightest future of the two stocks – but again, it’s important to remember that just being a good business doesn’t make a stock a good investment. When a company has gone through a major growth run, it can often counterintuitively become a risky investment. In this case, INTC looks like the safer choice. However, things can change fast in the stock market, so be sure to re-evaluate your investments regularly.

This article originally appeared on GOBankingRates.com: Nvidia vs. Intel Stock: Which Is a Better Investment?

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