How are chipmakers positioning themselves for growth?

Gone are the days when large-cap semiconductor stocks like Nvidia Corporation (NASDAQ: NVDA) and Advanced Micro Devices Inc. (NASDAQ: AMD) were on the rise due to pandemic-era demand for electronic equipment, combined with chip shortages. Its industrial peer Intel Corporation (NASDAQ:INTC) hasn’t fared as well in 2020 and 2021, but what does the outlook for all three look like now?

Nowadays, chip makers and chip equipment manufacturers are mediocre compared to other industries.

However, each company’s outlook is quite different in its area of ​​specialization.

Nvidia has risen more than 31% over the past three months, although this rally has wavered over 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 lacked earnings views, according to MarketBeat data.

Sales of $5.931 billion were 17% lower than the year-ago quarter. As a result, earnings of $0.58 per share were 50% lower. This is the second consecutive quarter in which profits have fallen year over year.

The company has expanded into data center chips, a business that has been hampered by US restrictions on chips exported to China. The cryptocurrency slump and decline in crypto mining has also hurt the gaming business unit. Covid lockdowns in China also hurt results.

Since the earnings report, the shares are up 4%. Most of this gain occurred during sessions where the broader market also trended higher.

Analysts have a “moderate buy” rating on Nvidia, according to data compiled by MarketBeat. The consensus price target is $205.23, which represents 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, that’s expected to rebound 33% to $4.35 per share.

Slower earnings growth ahead?

Advanced micro-systemsmeanwhile, is expected to increase earnings this year and next, although Wall Street sees a bigger rally this year, with growth slowing to just 4% in 2023.

Despite this, analyst price targets for AMD show a consensus target of $99.88, which would represent an upside of 52.88%. That might sound 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 previous 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 suffered for some of the same reasons as Nvidia.

On the other hand, while it and Nvidia have seen weakness in data centers in 2022, analysts expect AMD to see strong growth in this line of business. Nvidia is still a strong contender, as it has announced its Grace line CPU superchips, which are expected to start shipping in early 2023.

Additionally, Nvidia has the allure (for some investors) of paying a dividend, which AMD does not yet offer.

Intel’s long price drop

Meanwhile, a well-established devotee Intel fell 44.45% this year, continuing a downward trend 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 earnings growth outlook, predicting declines of 63% this year and a more moderate decline of 2% in 2023. Intel reported a decline in net profit over the course of six of the past eight quarters, while MarketBeat’s earnings data exposure.

Intel remains 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. These errors led to the failure of the title rally in 2020, while other technologies roared after the initial collapse caused by the pandemic. As a result, revenue growth over the past two years has been weak 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.

However, last year the company realized its mistake and hired a new CEO, Pat Gelsinger, who had been a chip designer at Intel. A new CEO can often be a catalyst for further stock growth. Gelsinger discussed ambitious plans to gain ground on Asian chipmakers and make capital investments in US facilities.

Of the three companies, Nvidia looks the most likely to deliver substantial price gains in 2023, based on analyst expectations for the company’s earnings.

But events such as a new product announcement, a new partnership, or forecasts that beat expectations always have the potential to send stocks higher than investors or analysts anticipate.

NVIDIA is part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and led by entrepreneurs.