Semiconductor stocks have been underperforming of late. However, this is likely to be shaping up to be a nice buying opportunity given the sector’s strong fundamentals amid signs of strong demand.

If you do not currently own semiconductor stocks or if you are interested in adding more to your portfolio, this might be the best time to act. However, there are plenty of semiconductor stocks to choose from.

Texas Instruments (TXN) and Advanced Micro Devices (AMD) are two of the most intriguing stocks in the semiconductor space. Let’s take a look at these two semiconductors to determine which is the better buy.
 
Texas Instruments

TXN has an A grade in the Quality component of the POWR Ratings along with B grades in the Momentum and Sentiment components. If you are curious as to how TXN fares in the remaining POWR Ratings components, you can find out by clicking here. Of the 99 publicly traded companies in the Semiconductor & Wireless Chip space, TXN is ranked 16th. You can find out more about the stocks in this category by clicking here.

The top analysts think highly of TXN, especially at its current price, setting an average price target of $182.15 for the stock. If TXN were to rise to this level, it would jump nearly 5%. The analysts’ high target price for the stock is $220. Of the 32 analysts who have issued recommendations for TXN, 13 advise holding, nine recommend buying and six recommend the stock as a Strong Buy.

TXN has a forward P/E ratio of 25.45, a fairly low figure for a semiconductor. This forward P/E ratio is even more appealing considering TXN is a mere $10 below its 52-week high of $181.80. All in all, TXN has a slightly less than a 20% market share in the analog chip space. This is double the next closest semiconductor’s market share of the analog market.

Though TXN’s top-line growth hasn’t been that impressive in recent years, the company’s fourth-quarter earnings revealed 22% top-line growth, a figure that should impress even the most demanding of investors. TXN has repurchased nearly 50% of outstanding shares, creating free cash flow per share growth of more than 10% per year going all the way back to 2004. In short, TXN profitability continues to increase as time progresses.

Advanced Micro Devices

AMD is one of the top players in the semiconductors space, rivaling the industry’s leader, Nvidia (NVDA). AMD’s Radeon tech is on par with that used by NVDA for graphic processing. AMD has a B grade in the Momentum component of the POWR Ratings. The stock also has C grades in the Quality and Value components. Click here to find out how AMD fares in the Growth, Sentiment, and Stability components of the POWR ratings.

Of the 99 stocks in the Semiconductor & Wireless Chip space, AMD is ranked 79th. You can learn more about the stocks in this space by clicking here.

A total of 31 analysts have studied AMD. These experts have established an average price target of $102.53 for the stock, indicating it has more than 21% upside. The high target price for AMD is $161.90. Of the 39 analysts who have issued recommendations, seven consider the stock a Strong Buy, 16 consider it a Buy, 14 views it as a Hold, one insists it is a Sell and one considers it a Strong Sell.

AMD currently trades at a reasonable forward P/E ratio of 40.69. This is a respectable P/E ratio considering AMD operates in the semiconductor space.

AMD has had a difficult start to ’21, dropping 6% across the first two months. However, AMD is running up the score on Intel and other CPU market competitors. Add in the fact that the upcoming sales of next-generation video game consoles is a bullish sign for the company’s embedded and semi-custom chips and there is even more reason to feel good about the stock for the remainder of ’21. AMD’s revenue from this segment of its business was up 176% alone on a year over year basis in the fourth quarter of ’20. At the moment, AMD’s brass plans to deliver nearly 40% aggregate revenue growth in the year ahead, a solid figure coming on the heels of the prior year’s 45% hike.

Which is the Better Buy?

Choosing between these two semiconductor superstars is not easy. The edge goes to TXN as it has a better overall POWR Rating and superior individual POWR Ratings components.