Key Points
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Apple has experienced some sales declines in recent years, but it’s getting back to growth.
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Intel stock has run up in anticipation of the growth it could achieve from its recent contract wins.
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Apple (NASDAQ: AAPL) and Intel (NASDAQ: INTC) could be getting back into business together, at least according to a June 18 social media post from President Donald Trump. The deal, which neither company has publicly confirmed yet, would give Apple another manufacturer for its in-house designed chips, diversifying its supply chain. For Intel, it would be another much-needed win for its foundry business.
Intel’s stock popped significantly on the news, as this will be a much bigger deal for the chipmaker than it is for Apple. However, as of the close of trading on Thursday, the stock was back to about where it closed on June 17.
Intel stock has been a better performer than Apple over the past year, rising dramatically as signs of a long-hoped-for turnaround have emerged. But between the two tech companies, which looks like the better stock to buy from here?
New business prospects are spurring both stocks on
Apple is a fairly simple business to understand: It makes consumer tech hardware. The iPhone obviously headlines this, and it still provides about half of the company’s revenues. But it has other products that make up a nice chunk of its revenue, too. The biggest area of growth for Apple is its services segment, which produces regularly recurring subscription revenue streams, in contrast to hardware purchases that may occur every two to five years.
One area where Apple lacks a strong subscription service offering is artificial intelligence (AI). Though it does have Apple Intelligence, currently, there is no AI subscription. That may be coming, and could spur major growth down the road. But it hasn’t happened yet.
Intel is in a similar boat. It has a legacy processor business that isn’t delivering much strong growth, and it’s operating in a saturated market with several rising competitors. It will find the processor market a difficult space in which to generate real growth. Instead, its chip foundry business is where investors are hoping to see the biggest gains. While Intel has been working to win those third-party contracts, the segment still hasn’t delivered the results investors want.
Both businesses are bolstered by existing product lines with hopes for a stronger future. With Apple’s core product lineup stronger than Intel’s, I think it’s the winner of this category.
Winner: Apple
Neither company’s growth has been that impressive
During the second quarter, Intel’s growth was a lackluster 7%. While AI products grew at 22% and its foundry business rose 16% year over year, that just isn’t enough growth to get me excited about the stock. Apple’s revenue growth was practically non-existent over the past five years, but it has spiked in recent quarters.
AAPL Revenue (Quarterly YoY Growth) data by YCharts.
If it can maintain this elevated growth rate, then its current stock price can be justified, though it isn’t trading at a cheap valuation relative to its growth rate.
With Apple growing at a much faster pace than Intel, I think it’s safe to say that Apple currently wins this category.
Winner: Apple
Both companies trade at high valuations
Because there is a lot of change coming from both companies, valuing each stock using forward earnings is the best plan. From this standpoint, both Apple and Intel trade at a premium.
AAPL PE Ratio (Forward) data by YCharts.
At 33 times forward earnings, Apple is one of the most expensive of the megacap tech stocks. Microsoft, for example, trades at 19.3 times forward earnings, and Nvidia trades at 22.3, yet Apple is growing at a slower pace than either of them.
Intel is far more speculatively valued, as the stock has run up in anticipation of major growth driven by its recent contract wins. Even based on analysts’ projections for 2027 earnings, Intel trades for nearly 90 times forward earnings.
That’s a far too high a premium to pay before there’s evidence of a real turnaround, so I’m more likely to avoid Intel’s stock. Although Apple wins this match-up, I think investors could do better with other AI stock picks. Several great AI companies, such as Microsoft and Nvidia, are trading at far cheaper valuations and offer better growth prospects.
Winner: Apple
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Keithen Drury has positions in Microsoft and Nvidia. The Motley Fool has positions in and recommends Apple, Intel, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
