Gone are the days when large semiconductor stocks like Nvidia Corporation (NASDAQ: NVDA ) and Advanced Micro Devices Inc. (NASDAQ: AMD) was high on the pandemic’s demand for electronics equipment, combined with chip shortages. Industry peer Intel Corporation (NASDAQ: INTC ) didn’t fare as well in 2020 and 2021, but what does the outlook for all three look like now?
These days, chip makers and chip equipment makers are mediocre performers compared to other industries.
However, each company’s outlook is quite different in its specialty area.
Nvidia is up more than 31% over the past three months, although that rally sputtered in the past month.
Nvidia specializes in chips for video games and other graphics applications. When it reported third-quarter results in mid-November, revenue beat expectations, though the company missed revenue estimates, MarketBeat data show.
Sales of $5.931 billion were 17% lower than last year. As a result, earnings of $0.58 per share were 50% lower. It was the second quarter in a row where earnings fell year-on-year.
The company expanded into data center chips, a business that was affected by US restrictions on chips exported to China. The cryptocurrency collapse and a decline in crypto mining also hurt the gaming business. Covid lockdowns in China also hurt results.
Since the earnings report, the shares have risen 4%. Most of this gain occurred during sessions where the broader market was also trending higher.
Analysts have a “moderate buy” rating on Nvidia, according to data compiled by MarketBeat. The consensus price target is $205.23, representing a potential upside of 22.78%.
For the full year, Wall Street sees Nvidia earning $3.27 per share, down 25% from 2021. Next year, it will decline 33% to $4.35 per share.
Slower income growth going forward?
Advanced Micro Devicesmeanwhile, is expected to grow earnings this year and next, although Wall Street sees a more significant dent this year, with growth slowing to just 4% in 2023.
Despite that, analysts’ price target for AMD shows a consensus target of $99.88, which would be an upside of 52.88%. That may seem very optimistic for a stock that has fallen at a similar rate, 53.77%, this year. Still, it’s worth noting that stocks need more upside juice to regain their former value.
AMD competes with Nvidia in the graphics card market. While Nvidia has gained market share, some of that has come at Nvidia’s expense. Additionally, AMD has suffered from some of the same reasons that Nvidia has.
On the other hand, while it and Nvidia have seen weaknesses in data centers in 2022, analysts expect AMD to see strong growth in that industry. Nvidia remains a formidable contender, however, as it announced its Grace line of CPU Superchips, scheduled to begin shipping in early 2023.
In addition, Nvidia has the attraction (for some investors) of paying a dividend, something AMD does not yet offer.
Intel’s long price decline
Meanwhile well-established faithful Intel down 44.45% this year, continuing a decline that began in April 2021. This stock completely missed the rallies that Nvidia and AMD staged heading into the final months of 2021.
Additionally, analysts have a dim view of Intel’s revenue growth prospects, predicting a 63% decline this year and a more muted 2% decline in 2023. Intel has reported declines in net income in six of the past eight quarters, as MarketBeat earnings data shows .
Intel is still the market leader in the design and manufacture of chips for servers and personal computers. It also has a robust data center business.
But Intel made several missteps when it came to new business ventures. Those failures resulted in the stock failing to rally in 2020, while other technologies roared back from the initial pandemic-driven meltdown. As a result, revenue growth over the past two years has been little or non-existent.
The company’s missteps in recent years have included forays into drones, wearables, robotics, virtual reality, self-driving cars and smart glasses.
But last year the company realized the error of its ways and hired a new CEO, Pat Gelsinger, who had served as a chip designer at Intel. A new managing director can often be a catalyst for renewed growth in the warehouse. Gelsinger has discussed ambitious plans to gain ground on Asian chipmakers and make capital investments in American facilities.
Of the three companies, Nvidia appears best suited to record significant price gains in 2023, based on analysts’ expectations for the company’s earnings.
But events like a new product announcement, a new partnership or forecasts that exceed expectations always have the potential to send stocks higher than investors or analysts expect.
NVIDIA is part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.