Intel Faces Competitive Challenges Amidst Shift to AI Market

Intel (NASDAQ: INTC) has struggled to maintain investor confidence, reflecting one of the more disappointing stock performances in recent market history. Over the past 20 years, shares of this pioneering chipmaker have declined nearly 15%. Intel has missed significant technology shifts, particularly in mobile and now in artificial intelligence (AI). Notably, it passed on the opportunity to invest in OpenAI as recently as 2017.

In contrast, competitors like AMD and Nvidia have significantly outperformed Intel, with chip stocks generally thriving over the last decade amidst Intel’s lagging performance.

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Earlier this year, Intel sparked some optimism by appointing Lip-Bu Tan as its new CEO. Tan, previously CEO of Cadence Design Systems, had resigned from Intel’s board last August due to frustration regarding the company’s conservative approach to risk-taking and its AI strategy. Despite this leadership change, Intel still grapples with substantial structural challenges stemming from past strategic missteps.

Investors are cautiously optimistic about Tan’s potential to revitalize the company, but there are predictions that two other tech stocks could surpass Intel’s performance over the next two years.

Image source: Getty Images.

1. AppLovin

AppLovin (NASDAQ: APP) emerged as a remarkable growth story in 2024, with shares increasing more than 700% last year. However, recent economic concerns, such as softening consumer sentiment and ongoing trade tensions involving President Trump, have led AppLovin’s market cap to fall to $81 billion. This figure is now below Intel’s market cap of $88.6 billion as of this week.

With a robust growth trajectory, AppLovin is positioned to surpass Intel in value over the next five years. In 2024, the company reported a 75% increase in advertising revenue, reaching $3.22 billion. It also divested its mobile apps business to concentrate on its core adtech operations.

The rapid growth can be attributed to the Axon AI engine AppLovin developed in-house, using its mobile game portfolio for research and innovation—an advantage that many adtech firms lack. The company is also branching out into connected TV (CTV) and e-commerce, indicating ample room for expansion beyond its traditional focus.

Although the stock has seen a decline of about 50% from its peak, AppLovin now appears more reasonably priced, with a price-to-earnings ratio of 52.

2. Micron

Micron (NASDAQ: MU) shares several similarities with Intel, as it is also one of the few integrated device manufacturers in the U.S., designing and producing chips. This connection exposes Micron to the business cycle, causing its memory chip prices to fluctuate rapidly based on supply and demand dynamics.

Recent results reveal that Micron continues to capitalize on the AI surge; its high-bandwidth memory (HBM) chips are in high demand for data centers. In its fiscal second quarter, which ended in February, revenue jumped 38% to $8.05 billion, driven by a significant increase in data center revenue, which now constitutes over half of the company’s total revenue.

Micron’s margins have also improved considerably, owing to heightened demand and a favorable pricing environment. Gross margins doubled to 36.8%, while adjusted earnings per share rose impressively from $0.42 to $1.56.

In the coming years, Micron stands to benefit from its strong position in the memory chip market and surging demand fueled by AI innovations, especially since Nvidia is one of its largest customers.

The stock also has a more advantageous valuation compared to Intel, currently trading at a price-to-earnings ratio of just 17. If the data center business continues to thrive, Micron’s stock price is likely to increase significantly. It currently holds a market cap of $79.4 billion, making it feasible for Micron to surpass Intel’s valuation as the AI trend continues to grow.

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Jeremy Bowman has positions in Advanced Micro Devices, Micron Technology, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, AppLovin, Cadence Design Systems, Intel, and Nvidia. The Motley Fool also recommends shorting May 2025 $30 calls on Intel. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.