Intel (NASDAQ:INTC) stock seems to be stuck in neutral, but a new focus on artificial intelligence (AI) chips could help the company regain favor among analysts and investors. I am bullish on Intel stock, but be prepared to hunker down for a multi-year buy-and-hold strategy, as Intel’s AI chip rollout will take a while.
Intel was once America’s undisputed leader among chipmakers. Lately, however, Intel has lost market share to rival Advanced Micro Devices (NASDAQ:AMD). Plus, Nvidia (NASDAQ:NVDA) is 2023’s market darling among chip manufacturers.
Consequently, INTC stock has been range-bound all year, while other semiconductor stocks have broken out to the upside. Furthermore, as we’ll see, analysts are generally lukewarm on Intel. Still, an argument can be made that Intel will have its time in the limelight again, though probably not in the near term.
Intel Practically Throws in the Towel on Mobileye, Focuses on AI
As the old saying goes, it’s better late than never. Intel ventured far afield of its core chipmaking business when the company invested in self-driving technology specialist Mobileye Global (NASDAQ:MBLY). Evidently, the results haven’t been stellar, so Intel has wisely decided to sell a substantial portion of the company’s stake in Mobileye.
This should provide Intel with a capital infusion, but more importantly, it will enable Intel to focus on more high-confidence pursuits. Among those pursuits is developing chips that can accommodate the intense computational power needs of AI applications. This year, investors are enamored with Nvidia because the company has touted itself as a best-in-class manufacturer of graphics processing units (GPUs) for generative AI and other machine learning use cases.
It took a while, but Intel finally threw its hat into the AI ring and started giving the market what it wants. Not long ago, Intel shared its “portfolio of future [high-performance computing] and AI products,” notably including Intel’s Data Center GPU Max microprocessor series. In addition, according to Reuters, Intel recently “provided a handful of new details on a chip for artificial intelligence (AI) computing it plans to introduce in 2025.”
Intel’s Surprising Potential Partnership with Nvidia
Now, I can hear the skeptics saying that 2025 is a long way away. That’s a fair point, and INTC stockholders will need to be patient, as it will take a while for Intel to develop its new AI-ready hardware. However, it’s encouraging that Intel could actually end up working with an industry rival that’s a favorite among today’s financial traders.
I’m referring to Nvidia, which (believe it or not) actually praised Intel’s test chips not long ago. Nvidia CEO Jensen Huang reportedly said, “We’re open to manufacturing with Intel. And [Intel CEO] Pat [Gelsinger] has said in the past that we’re evaluating their process, and we’ve recently received the test chip results of their next generation process and the results look good.”
It would be a win-win for both companies’ shareholders if Nvidia, the current AI hardware favorite on Wall Street, sourced components from Intel. Nvidia wouldn’t have to rely on Taiwan Semiconductor (NYSE:TSM) as much, and Intel would gain a major customer and, in effect, a stamp of approval from a very popular company. However, these things take time, and INTC stock investors should maintain a multi-year time horizon, as these developments will likely play out over a span of years, not months.
Is INTC Stock a Buy, According to Analysts?
It looks like Wall Street has a fairly neutral outlook on Intel. On TipRanks, INTC stock comes in as a Hold based on five Buys, 17 Holds, and four Sell ratings. The average Intel stock price target is $30.84, implying 3.1% downside potential.
If you’re wondering which analyst you should follow if you want to buy and sell INTC stock, the most profitable analyst covering the stock (on a one-year timeframe) is Toshiya Hari of Goldman Sachs (NYSE:GS), with an average return of 8.41% per rating and a 59% success rate. Click on the image below to learn more.
Conclusion: Should You Consider Intel Stock?
I’m bullish on Intel stock, but it’s not right for every investor. The market isn’t likely to flip bullish on Intel this year, and 2024 might also frustrate short-term shareholders.
On the other hand, patient long-term investors should take a look at INTC stock. Intel is finally moving aggressively into the AI-focused hardware space, and if there’s a partnership with Nvidia, Intel could be a favorite among tech traders someday.
