Apple vs. AMD: 2023 Tech Stock

Since the beginning of the year, Apple and AMD share prices have seen double-digit increases in their share prices.There has been a rapid rise in tech stocks since January 1, as they are recovering from the steep declines they suffered in 2022. With Apple shares up more than 10% in the new year, investors have been rallying around Apple (AAPL 0.27%), along with AMD (3.08%), both of which have seen their shares rise more than 10% in the new year.

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Apple has a number of products that are launching this year, including one that will see the company enter a market that is expected to experience high growth in the future. Currently, AMD is gaining a huge advantage over Intel in the data center market, which is one of its main competitors. AMD's data center business, meanwhile, is booming.

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There is no doubt that Apple and AMD are likely to be valuable assets in any portfolio, both offering substantial and consistent long-term growth, with both companies' stocks having returned triple-digit returns in the past five years. However, if you are only looking to add stock to one of these tech specialists right now, you will need to know which one will be a better buy in 2023 in order to make the right decision. 

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Apple seeks independence for new strength

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It seems that Apple's theme for 2023 is striving for independence after a year that was plagued by macroeconomic headwinds, and its iPhone is a perfect example of it. It is positive for Apple's long-term stability and growth that Apple places such a great emphasis on moving away from relying on other companies to manufacture a product that made up 52% of its revenue in 2022. 

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Apple announced on Jan. 9 that it would switch to homegrown chips by 2025 for its wireless, Wi-Fi and Bluetooth products, ending its partnership with Qualcomm and Broadcom currently. A few days later, Apple revealed that their iPhone screens would be swapped out for in-house designed versions of those manufactured by Samsung and LG starting on Jan 11. 

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Taking both of these measures will reduce Apple's operating costs, resulting in a higher profit per phone for Apple, adding extra protection to Apple's business if there are any further economic challenges that weaken consumer demand in the future.

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Along with component independence, Apple is also taking steps to differentiate the iPhone's operating system from Alphabet's Google apps by improving map and search functions as well as advertising, which are all features that will distinguish Apple's phone from Alphabet's. As far as Apple's attitude goes going forward, the company seems to be of the opinion that if there is money to be made from its most in-demand product, it will be the company to make it.

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It is estimated that Apple shares have increased by 242% since the beginning of 2018. There are several reasons why the company is absolutely worth an investment in 2023, including the potential to increase profits in its iPhone business over the long term and the high demand for its other popular products and services.

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Data center innovation shows AMD's potential

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As PC sales declined in 2022, AMD shares plunged 55% as investors fled the market seeking higher ground as a result of declining PC sales. There have been signs that the company is slowly starting to recover in 2023, and the company's stock has risen 12% since January 1st.

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AMD's 463% gains over the past year demonstrate its strength over the long run, despite a challenging year. There is still a lot to be done when it comes to the sluggish PC market. Despite that, the semiconductor company is an attractive investment prospect due to its booming data center business. 

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AMD's data center division accounted for the largest portion of AMD's revenues in the third quarter of 2022, growing 45% year over year to reach $1.6 billion, a 45% increase from the same period last year. Now that AMD has launched its new generation of data center chips, the business is looking more lucrative. Azure, Oracle, and Alphabet's Google are already clients of the Genoa chips, which were released in November.

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On the other hand, AMD's lead over Intel's data center chips, which were unveiled on Jan. 10, is what makes this news all the more remarkable. Due to four delays, Intel chips, called Sapphire Rapids, were released two years later than planned, resulting in a two-year delay in the release of the chips. Apart from the fact that it is tardy, Bernstein analyst Stacy Rasgon also claims that recent benchmarks have shown AMD's Genoa outperforming Sapphire Rapids on a range of "general purpose workloads."

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AMD could be well positioned for the rapidly growing data center market with the launch of the Genoa-X chip later this year.

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Is one better than the other?

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Both Apple and AMD are well positioned in some of the world's most lucrative markets, and they both have excellent long-term outlooks. As a way of determining which company might be a better buy at present, we can look at a few valuation metrics that can help indicate whether an organization's stock price aligns with its financial performance in order to make a rational decision. As the price-to-earnings ratios are compared, Apple's P/E ratio of 23.4 makes its stock a better deal than AMD's P/E ratio of 43.4, which makes AMD's stock a better bargain as well. As we can see from the combination of this metric along with the price-to-free cash flow metric, which can be used to determine the amount of cash the company has on hand in relation to its stock price, it is clear that the iPhone company has been able to overcome an economically challenging year better than AMD (Apple's P/FCF ratio is 21 whereas AMD's is 31.3).).

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In the end, Apple is currently in a more stable, reliable position than it was previously. Because of this, it is considered to be one of the best tech stocks in 2023. Even so, AMD is still a company that should be watched closely as well as potentially invested in at the next opportunity in the future.