Investment idea about Intel and AMD .
Conclusion：Sell Intel and get AMD in your pocket.
We can see valuation about Intel is way lower than AMD. But this has reasons.
1. Intel’s macro headwind
DCG accounted for 31% of total revenue in 2019. It is the key driver of Intel’s business, however, the COVID-19 makes enterprise spending shrinking and cloud service provider accelerate their establishment to cover Internet traffic during lockup period in 1H. So we can expect CSP will enter capacity digestion in 2H.
2. Intel’s micro headwind
Key competitor, AMD is gaining share, driven by aggressive product strategy and lower pricing. NB and server CPU is expected to gain more than 5% ‘till 2022 (baseline 2019) over Intel.
3. Market is filled with bad news about Intel
Share loss to AMD and Apple self-makes Mac CPU start from 2020 and will stop ordering from Intel from the end of 2022. And Mac’s units orders take up 8% of Intel’s shipments in 2019. So we can expect further market loss in 2022, and PC unit mkt share in 2019 is nearly 87%-90%, 8% loss means Intel’s mkt share will be 80%-82%, notablely this metric doesn’t include AMD’s share gain from Intel in the coming two years.
What can make me have diff. opinion over Intel will be:
(1)Tiger Lake performance in 2021 (2)new HPC GPU is planned to release in the end of 2021 (3)whether CHIPS Act and Foundry Act will pass and benefit Intel.
AMD’s catalysts are clear
(1)Share gain in PC market, especially in NB.
(2)server CPU gain market and maintain over 10% market share(didn’t include communication’s market, TAM is smaller than Intel)
(3)Milan will release in the end of 2020, let’s see market acceptness.
(4)Gaming console selling in 2020, I expect it to over 79M shipments in 2020, due to great update about CPU, GPU and memory versus Xbox one and PS4. Also, COVID-19 second wave to keep people shelter at home. Although many people is worrying about consumer spending will shrinking in 2H. But Gaming’s demand elasticity is near vertical, you guys must know what gaming means for a man! And I expect it be the main driver of stock price.
I still look LITE is a better stock than IIVI, even the valuation is cheap for IIVI now. catalyst always be Apple’s World-facing and front facing adoption.
ROKU is in secular trend of streaming market, if you found it is hard to you to invest to those high valuation streaming stocks.
Cloud software is overpriced now, I expect market will shift their capital to semi sector or hardware sector. Although they are still a forward looking stock, but when we look back fundamentals, stock price is diverging.
Airline stocks is worth to build some position right now, but hold it for 2–3 years, wait until vaccine is invented and fundamental and economics is back to normal, I expect this sector to have 25% CAGR return in the coming three years.
