This matchup is one that will play out over the coming years as the artificial intelligence (AI) market continues to develop. NVIDIA Corporation (NVDA 1.02%) has seen massive revenue growth in its datacenter segment on the strength of its graphics processors (GPUs) used in AI applications and has invested extensively in autonomous driving technology. Intel Corporation (INTC +12.93%) had been on a buying spree of smaller AI companies, but earlier this year shocked investors with its $15.3 billion acquisition of Israeli computer vision and machine-learning company Mobileye N.V. (MBLY +0.00%).
Both companies are industry leaders in the semiconductor market -- Intel for its CPUs, and NVIDIA for its GPUs used in gaming and AI. Both are titans in the space, but which company is a better buy right now? Let's look at a variety of metrics to see what they reveal.
NVIDIA and Intel battle for supremacy in AI and autonomous driving. Image source: Getty Images.
Financial fortitude
Intel's seemingly heavy debt load may seem surprising at first, but the company is heavily leveraged because of its ownership of its chip manufacturing facility. The company produced a significant amount of free cash flow over the trailing 12 months, certainly enough to handle any near-term needs. Both companies carry sufficient cash given their specific situations, and Intel has a large amount of debt, which is appropriate given its fabrication facility. Neither company seems to have a clear advantage.
|
Company |
Cash |
Debt |
Net Income (TTM) |
Free Cash Flow (TTM) |
|---|---|---|---|---|
|
Intel |
$4.93 billion |
$25.28 billion |
$11.23 billion |
$11.30 billion |
|
NVIDIA |
$1.99 billion |
$2.78 billion |
$1.96 billion |
$1.46 billion |
Data by YCharts. Chart by author. TTM = Trailing 12 months.
Winner = Tie
Recent results and growth prospects
In its most recent quarter, Intel grew revenue to $14.8 billion, up 8% year over year. The company has been focusing on its higher-growth segments to drive future gains, and its data center and Internet of Things segments grew 6% and 11% year over year, respectively. Intel has been buying up companies in the AI and autonomous driving sectors over the last year in hopes of capitalizing on the emerging technology to supplement slowing growth in its chip markets.
During its recent financial release, NVIDIA reported revenue of $1.9 billion, which grew 48% over the prior-year period, led by 49% year-over-year growth in its gaming segment and a whopping 186% growth in data center revenue over the prior-year period. The company has been aggressively pursuing partnerships in the AI and autonomous vehicles spaces for some time, as NVIDIA GPUs were the early choice for the data-intensive function of training deep-learning AI systems, and the company has leveraged that early lead.
While Intel is making moves to accelerate its growth, NVIDIA's previous investments are already bearing fruit, propelling the company's current results and setting the foundation for future growth.
Winner = NVIDIA
Stock performance and valuation
Over the last year, Intel has failed to keep pace with the broader S&P 500, up just over 14% to the market's near-16% gain. During the same period, NVIDIA's stock is up an astonishing 200%! Given that performance, you'd expect the company to be assigned a higher valuation. From a price-to-earnings perspective, NVIDIA trades at a nosebleed 48 times trailing earnings. Intel has a less expensive multiple of 16.
NVIDIA's higher multiple indicates that investors are expecting the company to continue its meteoric growth. Even looking forward doesn't change that view. NVIDIA carries a forward earnings multiple of 41 compared to Intel's forward valuation of 13.
While NVIDIA's stock has generated far better returns, Intel's is significantly less expensive when it comes to valuation.
Winner = Tie
Dividends and share buybacks
Over the course of the last year, both companies have been buying back shares, and both have paid a dividend. Intel's diluted shares outstanding is essentially flat over the last year, while NVIDIA's is up slightly. This indicates that share repurchases are barely offsetting share based compensation for both companies, so no advantage there.
Intel currently has a higher dividend yield of just under 3% compared to NVIDIA's paltry yield of 0.4%. This is likely a function of the tripling of NVIDIA's share price over the last year. In terms of payout ratio, Intel is currently spending nearly 44% of its earnings to fund its dividend, much higher than NVIDIA's 14%. Any payout between 35% and 55% is considered healthy. This indicates that NVIDIA has much more room to increase its dividend in future.
Dividend Yield (TTM) data by YCharts.
Neither company is currently decreasing its share count. Intel has a higher current dividend, though NVIDIA has greater flexibility for future payouts.
Winner = Intel
Final tally
The final tally reveals a tie. The reality is these are two solid businesses that offer investors very different things.
For those looking for higher growth with slightly higher risk, it's NVIDIA, while folks looking for more stability and a higher dividend might decide Intel looks better.
