Many semiconductor stocks are soaring right now. Over the past three years, for example, Nvidia's stock has skyrocketed nearly 600%.
But what about other chip stocks, like Intel (INTC -0.03%)?
Intel's 3-year performance paints a surprising picture
While Nvidia stock has septupled in value the last three years, Intel shareholders have lost roughly 38% of their money. A $300 investment then would now be worth just $186.
What happened? Intel fell victim to a combination of self-created and industrywide challenges. Increased competition caused the company to lose central processing unit (CPU) market share, while a multiyear global chip shortage pressured global sales. As Fool writer Dani Cook explains, these challenges "forced Intel to overhaul its entire model," resulting in a strategy that will prioritize manufacturing and artificial intelligence (AI).
AI, of course, should be a huge focus of any chip manufacturer. It's the biggest reason why Nvidia stock has performed so well. That company's AI capabilities are still well ahead of the competition. OpenAI's ChatGPT was trained using Nvidia A100 processors. Nvidia's next-gen H100 processors, meanwhile, deliver up to 30 times the performance of the A100.
While Nvidia currently has the lead, the AI revolution will take decades to fully play out. If the past is any indication, other chip makers like Intel and AMD will eventually catch up. That's especially true given Intel's pivot to a foundry model, which the company calls "the most significant business transformation in its 55-year history." By revamping its development model and building manufacturing plants in the U.S., management expects to drive significant cost savings with faster innovation.
Will Intel succeed in its turnaround? It's far too early to know for sure. But shares are a relative bargain versus Nvidia. At Thursday's prices, Intel stock traded at 2.3 times trailing-12-month revenue versus Nvidia's lofty valuation of 42 times sales. If you're looking for a bargain turnaround play, Intel is a great pick.
