Intel vs ASML: Which AI Stock to Invest In?

Published Date: 16/08/2024

Investing in artificial intelligence, Intel vs ASML, AI chip fabs, semiconductor-equipment company

Artificial intelligence (AI) stocks have experienced a significant pullback over the last month, with the Nasdaq-100 technology sector dipping 13%. However, recent earnings from tech giants like Advanced Micro Devices, Amazon, and Alphabet suggest the industry still has much to offer over the long term.

Market leaders have reported impressive growth in their AI divisions, aligning with data from Grand View Research, which shows the AI market is expected to expand at a compound annual growth rate of 37% through 2030 and reach nearly $2 trillion in spending.

Two attractive options for investing in AI are Intel and ASML Holding NV. Intel is investing heavily in constructing AI chip fabs, while ASML is a semiconductor-equipment company supplying crucial machinery for producing all kinds of chips.

Intel's stock has plunged 43% over the last 30 days, following disappointing second-quarter 2024 earnings. Revenue fell by about 1% year over year, missing expectations by $150 million. Earnings per share of $0.02 were $0.08 less than forecasts.

The earnings miss came alongside news that Intel would cut 15% of its workforce and halt its Q4 2024 dividend to reduce capital expenditures. Costly moves, such as ramping up Core Ultra PC chip production and moving its Intel 4 and 3 chip wafers to a plant in Ireland, contributed to recent declines.

Meanwhile, ASML's share price has tumbled 20% amid a tech sell-off over the last month. The Dutch tech company is the world's leading supplier of lithography systems, the equipment necessary to manufacture a range of chips, including the kind used for AI.

ASML's dominance has seen it attract all the world's biggest foundries, with some of its clients including Taiwan Semiconductor Manufacturing, Samsung, and Intel. The company's annual revenue and operating income have consistently risen 283% and 513%, respectively, over the last decade.

FAQS:

Q: What is the expected growth rate of the AI market through 2030?

A: The AI market is expected to expand at a compound annual growth rate of 37% through 2030 and reach nearly $2 trillion in spending.

Q: What is Intel's current financial situation?

A: Intel's stock has plunged 43% over the last 30 days, following disappointing second-quarter 2024 earnings. Revenue fell by about 1% year over year, missing expectations by $150 million.

Q: What is ASML's position in the semiconductor market?

A: ASML is the world's leading supplier of lithography systems, the equipment necessary to manufacture a range of chips, including the kind used for AI.

Q: What are the implications of rising tensions between the U.S. and China for the chip market?

A: Rising tensions between the U.S. and China could impact the chip market, but many of the world's top foundries are working to build factories in the U.S., which could secure ASML's business over the long term.

Q: Which stock is a better buy right now, Intel or ASML?

A: ASML's stock might be the more reliable buy right now, given its lower price-to-earnings ratio and more secure financial situation.

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