Is Advanced Micro Devices, Inc. (AMD) a Good Investment?

Nvidia Corporation (NASDAQ:NVDA) is another relatively cheap semiconductor company, trading at a mere 13x forward earnings. Nvidia is also one of the top semiconductor producers, paying a modest dividend yielding 2.4%. Aside from Intel, it is the cheapest on a PEG basis at 1.4, and also trades in line with Intel on a P/S basis at 1.9x. Ken Fisher – founder of Fisher Asset Management and long-time Forbes columnist – is one of the key names invested in Nvidia (check out Ken Fisher’s bullish bets).

Moving on, Microchip Technology Inc. (NASDAQ:MCHP) pays a robust dividend yielding 4.3%, but the company’s payout is well above other peers at 125%. We remain cautious on Microchip’s valuation as well, where its P/E is at 30x – the highest of the five listed – and its 4.5x sales multiple is also rather elevated. One other major problem is that this above-average valuation is not supported by the sell-side’s estimates, given its 5-year expected EPS growth rate of 9% (annually). Microchip calls billionaire Steven Cohen one of its top investors (check out Steven Cohen’s entire portfolio).

Last but certainly not least, Broadcom Corporation (NASDAQ:BRCM) is one of the best growth opportunities in the semiconductor industry. This tech company also pays a solid dividend of 1.2% and boasts a forward P/E near the bottom end of the industry at 11x. We like Broadcom despite its industry-low EBITDA margin of 16%. Broadcom has beaten the Street’s earnings estimates in each of the last three quarters, and analysts expect the company to reach a Q4 EPS of 74 cents, nearly 9% above last fourth quarter’s levels.

In short, we see Advanced and Intel as income plays, but the latter may be the best-positioned. Advanced is one of the most expensive semiconductor stocks listed here, and we believe that Intel will continue to build off of its stranglehold on the GPU market.

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