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Intel CEO Makes a Huge AMD Claim, But Has He Spoken Too Soon?

Shares of chip giant Intel (NASDAQ: INTC) have gained impressive momentum since the beginning of 2022 despite the sell-off in tech stocks, driven by the possibility of a turnaround in the company's fortunes thanks to its latest generation of Alder Lake client processors.

There are reports that the Alder Lake processors are more powerful than their counterparts from Advanced Micro Devices (NASDAQ: AMD), while recent third-party market share numbers indicate that Intel has been able to arrest AMD's growth in central processing units (CPUs). However, Intel CEO Pat Gelsinger said in a video interview that Chipzilla has put AMD in the "rearview mirror" in the client CPU market with its Alder Lake processors.

Gelsinger went on to add that AMD will "never again" be in Intel's "windshield" as the latter is now "leading the market." Intel's CEO seems quite upbeat about his company's prospects in the new year, and hasn't minced any words about AMD's future in the client CPU market. However, Intel bears may feel that Gelsinger has started celebrating too early. Let's see why they may be right.

Image source: Getty Images.

AMD could still pull ahead of Intel in 2022

The reason why Intel's Alder Lake client CPUs are gaining ground against AMD is that they are based on an enhanced 10-nanometer (nm) process that's reportedly better than the latter's Ryzen 5000 processors, which are based on a 7nm process. PC Gamer, a magazine and website covering the personal computer (PC) gaming industry, points out that Intel's 10nm process has a higher transistor density than AMD's 7nm process.

Not surprisingly, Intel has taken the lead from AMD, with third-party reviews stating that Chipzilla has now regained its gaming crown. AMD, however, could still turn on the heat, as the chipmaker is expected to launch a new generation of processors later this year based on the Zen 4 architecture.

AMD's Ryzen 7000 series processors could hit the market in the second half of 2022, and they could take the wind out of Intel's sails as they will be based on Taiwan Semiconductor Manufacturing's (TSMC) 5nm manufacturing process. So AMD looks all set to move to a more advanced manufacturing node in 2022 that could help it accelerate ahead of Intel on the technology front.

That's because TSMC's 5nm process is expected to be significantly denser than Intel's 10nm offerings, which means that the former's chips will pack more transistors -- which should ideally result in higher computing performance and low power consumption.

Hence, AMD could start eating into Intel's market share once again later this year, especially considering that Chipzilla's competing chips -- the 7nm Meteor Lake processors -- are expected to hit the market only in 2023, and that's if they don't run into any delays. As a result, Gelsinger's belief that Intel has left AMD behind in the client CPU market may not hold by the end of the year.

Intel bulls, however, have reason to cheer as well, since Gelsinger's approach shows that the company is going all out to defend its turf.

Chipzilla investors need to focus on the bigger picture

The discussion above indicates that it is too early to say that Intel has regained its manufacturing lead and raced ahead of AMD. Investors, however, should focus on the fact that the company's long-term product roadmap does indicate that it could eventually get ahead of its rivals.

The company plans to retake its manufacturing crown from rivals by 2025, which is when it intends to introduce the Intel 20A process. The chipmaker will move to a new transistor architecture with Intel 20A, which would be its first new transistor architecture since 2011. In all, Intel plans to upgrade its manufacturing technologies in the coming years, which could help it make powerful chips on the back of billions of dollars' worth of investments.

This would be great news for Intel's client computing group (CCG), which accounts for most of Intel's revenue and seems to be on the verge of a turnaround already. CCG revenue for the first nine months of 2021 increased only 4% over the prior year to $30.4 billion, as the company had to contend with lower average selling prices on account of discounts to sell more processors.

But now that Intel has reduced the technology gap and forced AMD to slash the price of Ryzen processors, it looks set to enjoy a mix of strong volumes and pricing this year. For instance, in the third quarter of 2021, Intel witnessed higher average selling prices in both desktops and notebooks, recording 16% and 10% year-over-year growth, respectively.

And if Intel continues to execute on its turnaround and eventually regains its manufacturing lead, it could turn out to be a top semiconductor stock in the long run.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns and recommends Advanced Micro Devices, Intel, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2023 $57.50 calls on Intel and short January 2023 $57.50 puts on Intel. The Motley Fool has a disclosure policy.


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