Stock of Advanced micro devices (NASDAQ: AMD) and Taiwan semiconductor manufacturing (NYSE: TSM) Both have doubled over the past 12 months.AMD has dazzled investors with strong CPU and GPU sales.TSMC, the world’s largest chipmaker, has benefited from orders. New chips soared
Both companies profit from Intelof (NASDAQ: INTC) Unfortunately, Intel’s chip shortage, caused by the tough jump from 14nm to 10nm chips, has prompted more PC manufacturers to buy AMD chips.
Intel’s foundry also toppled TSMC in a “process competition”; to make smaller, more energy efficient chips. The failure prompted AMD, which outsourced its production of chips to TSMC, to produce more advanced chips.
That’s why both AMD and TSMC easily outperformed Intel, losing more than 10% of their value over the past 12 months, including the Philadelphia Semiconductor Index, which is nearly 60% higher. Take a look at the two new chipmakers to see which stocks are better buy.
Difference between AMD and TSMC
AMD is a fabless chip maker that doesn’t make its own chips like Intel develops x86 CPUs for PCs and servers, GPUs, and other types of custom chips, but foundries like TSMC are chip makers.
AMD competes with Intel in the x86 CPU market and NVIDIA (NASDAQ: NVDA) In the modular GPU market, AMD controlled 39.8% of the x86 CPU market in the first quarter of 2021, according to PassMark, up from 33.2% a year ago.Intel’s share tumbled from 66.7% to 60.2%.
AMD has faced a tougher battle with NVIDIA.Its share of the add-on GPU board market dropped from 27% to 23% between the third quarter of 2019 and 2020, according to Jon Peddie Research. 73% to 77% .AMD also makes custom CPUs and GPUs for Sony and MicrosoftLatest game consoles
TSMC makes chips for customers other than AMD, including An apple (NASDAQ: AAPL), QualcommAnd NVIDIA last quarter generated 46% of revenue from smartphone chips, 37% from HPC (high-performance computers) chips, 9% from Internet of Things (IoT) chips, and the rest from other markets.
In process terms, 35% of TSMC’s revenue comes from today’s 7nm nodes, the other 8% coming from the next generation of 5nm chips, which just entered mass production last year. The rest of TSMC’s revenue comes from older chips.
TSMC’s only meaningful competitor in the high-end foundry market is SamsungWhich began producing 5nm chips last year In the low-end market it will compete with smaller and less advanced competitors such as GlobalFoundries and UMC.
Which chip maker is growing faster?
AMD’s revenues increased 4% in fiscal 2019 as adjusted earnings grew 39% in the first nine months of 2020.Revenues were up 42% year over year, with 47% growth in the computer and graphics business. And 31% growth in the embedded and semi-custom enterprise (EESC) business – and the improved profit business is 141%.
AMD argues that strong sales growth of Ryzen CPUs and Radeon GPUs in the computer and graphics segment, with its remote operations and home trends, has driven new PC sales and demand for EPYC data center chips in the EESC segment.
Analysts are expecting AMD’s revenue and profit to rise 42% and 92%, respectively, for the full year. Over the next year, they expect revenues and results to grow 27% and 47%, respectively.
AMD may face tougher comparisons year over year after the pandemic has passed. But the wind is still strong Strong sales of the PS5 and Xbox Series X and S consoles could also boost EESC revenue and offset the slowdown in the PC-focused CPU and GPU business.
TSMC’s revenue rose 4 percent in fiscal year 2019, but its earnings fell 2 percent as it struggled with a slowdown in the saturated smartphone market. It’s also rough to begin in 2020 as a pandemic disrupts chip production for smartphones and connected cars, new restrictions on Chinese tech giant Huawei, which relies on TSMC to produce chips. Within the organization, the pain intensified.
Despite those challenges, TSMC’s revenue continued to grow 30% year-over-year in the first nine months of 2020 as orders from leading customers like Apple and Qualcomm flowed in and revenue from The company is also up 64%. Analysts expect revenue and profit to grow 36% and 60%, respectively, for the full year.
Over the next year, analysts expect TSMC’s revenue and earnings to rise 16 percent and 12 percent, respectively, as those orders fell. However, a new order from Apple, which replaces Intel’s CPUs with its own TSMC-made chips, the growth of the HPC market and even external orders from Intel, could help analysts forecast the highest for next year.
A better buy: AMD
AMD and TSMC are still great long-term investments in the semiconductor market, but AMD is generating strong growth with fewer moving parts and less expensive stock at about 50 times its upfront earnings.
TSMC’s stock appears to be cheaper at about 30 times its forward earnings. But as a wider and more diverse play across the entire sector, the company’s growth could slow as weaker segments such as smartphones and automotive chips drive HPC business growth. So I believe AMD will be a little better buy than TSMC.