Nvidia Stock vs. Intel Stock: A Wall Street Analyst Says Buy One and Sell the Other

Nvidia (NASDAQ: NVDA) is the leading supplier of data center GPUs, which are particularly important for artificial intelligence (AI) training and inference. Intel (NASDAQ: INTC) is the leading supplier of data center CPUs, which are particularly important for orchestrating AI agents. But Harlan Sur at J.P. Morgan Chase recommends buying one stock and selling the other.

• He says investors should buy Nvidia. His target of $265 per share implies 32% upside from the current share price $200.
• He says investors should sell Intel. His target of $45 per share implies 52% downside from the current share price of $94.

Here's what investors should know about these semiconductor companies.

Image source: Getty Images.

Nvidia: 32% upside implied by J.P. Morgan's target

Nvidia is the clear center of gravity for the artificial intelligence boom. The company is well known for its graphics processing units (GPUs), chips that accelerate complex data center workloads. Nvidia GPUs consistently outperform competing chips when benchmarked in AI training and inference tasks.

However, Nvidia's greatest strength lies in its full-stack strategy, meaning it pairs GPUs with adjacent central processing units (CPUs) and networking platforms to build rack-scale data center systems. That lets the company optimize performance and power efficiency in ways less vertically integrated suppliers cannot.

CEO Jensen Huang recently told analysts, "Our ability to innovate across the CPU, the GPU, networking, and software, and ultimately drive down cost per token is unmatched across the industry." He also explained what that means for customers: "Data centers running on Nvidia generate the highest revenues."

Nvidia reported excellent fourth-quarter financial results. Revenue increased 73% to $68 billion and non-GAAP (adjusted) net income increased 84% to $1.62 per diluted share. Both numbers accelerated compared to the previous quarter. And Nvidia is likely to keep its momentum in the quarters ahead due to the upcoming launch of its next-generation Rubin GPU.

Wall Street estimates Nvidia's earnings will increase at 53% annually over the next two years. That makes the current valuation of 42 times adjusted earnings look quite reasonable, even cheap. Indeed, most analysts view the stock as undervalued. The median target price of $267.50 per share implies 33% upside from its current share price of $200.

Intel: 52% downside implied by J.P. Morgan's target

Semiconductor manufacturers are in a never-ending race to build smaller chips with faster processing speeds and greater power efficiency. For years, Intel was the leader in process technology, but the company fell behind Taiwan Semiconductor Manufacturing in 2017 due to a series of missteps, including slow adoption of EUV lithography.

Intel has since lost substantial market share in CPUs in both personal computers and data center servers as customers like Amazon and Apple have shifted to custom chips built on Arm architecture and manufactured by Taiwan Semiconductor. But investors recently got some good news.

Intel reported first-quarter financial results that crushed estimates on the top and bottom lines. Revenue increased 7% to $13.6 billion, driven by particularly strong sales growth in the data center segment, and non-GAAP earnings soared 123% to $0.29 per diluted share.

Even so, J.P. Morgan analysts led by Sur remain skeptical, saying the results were less about Intel regaining its foothold in the data center -- in fact, they expect the company to continue losing market share over the next year -- and more about price increases driven by supply constraints.

On a positive note, Intel may have won its first major foundry customer. Elon Musk says Tesla will use Intel's 14A manufacturing technology at its Terafab, two plants in Texas that will make chips for Tesla cars, Optimus humanoid robots, and AI data centers. Landing a major client could jump-start Intel's foundry business, which would help the company become a bigger player in the AI boom.

Wall Street analysts have revised forecasts higher and the consensus estimate now says Intel's adjusted earnings will grow at 62% annually over the next two years. That is far more bullish than before the latest quarterly report, but it still makes the current valuation of 165 times adjusted earnings look outrageously expensive. Indeed, most analysts think the stock is overvalued. The median target price of $80 per share implies 15% downside from its current share price of $94.

JPMorgan Chase is an advertising partner of Motley Fool Money. Trevor Jennewine has positions in Amazon, Nvidia, and Tesla. The Motley Fool has positions in and recommends Amazon, Apple, Intel, JPMorgan Chase, Nvidia, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool has a disclosure policy.