The artificial intelligence (AI) chip wars are still in full effect, and it’s game on as Intel (NASDAQ:INTC) works hard to compete with Nvidia (NASDAQ:NVDA) and other rivals. Intel is out of favor among AI chipmakers, and the company’s unveiling of new products didn’t change investors’ minds. Nevertheless, I am bullish on INTC stock and am actually glad that the share price didn’t fly higher on Tuesday.
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Intel is a premier U.S. processor producer. The company is spending a lot of time, money and effort toward building a foundry business. This means that Intel seeks to fulfill contracts to build chips from scratch and sell them to other companies.
Some optimists probably hoped that Intel stock would rocket higher on June 4. Why is that? I’ll drill down to the details in a moment, along with the actual outcome, which may surprise you. First, however, let’s see why a prominent Wall Street expert actually upgraded Intel, even while so many others aren’t feeling very bullish about the company in 2024.
Intel Stock’s “Unwarranted” Sell-Off
Just to recap, Intel released its first-quarter 2024 earnings report on April 25, when the share price was around $35. Investors were generally unhappy with Intel’s results, and now the stock sits near $30.
I didn’t think Intel’s quarterly results were all that bad. The company grew its revenue 9% year-over-year and posted adjusted earnings of $0.14 per share, beating Wall Street’s consensus estimate of $0.18 per share.
Nevertheless, as we’ll explain soon, analysts didn’t rally around Intel to support the company. One analyst, Bernstein’s Stacy Rasgon, even went so far as to call Intel “profoundly broken.”
Financial blogger Danil Sereda takes a different view, however. I definitely believe in reading what top bloggers like Sereda have to say about Intel, along with analysts’ views.
Sereda acknowledges that Intel “may not be efficient in terms of financials yet,” which is probably a polite way of saying that the company needs to improve its top and bottom lines. At the same time, he contends that Intel is “still too big and significant a player in the market to ignore its potential to influence the market at this stage.”
Furthermore, Sereda envisions Intel making inroads in the AI-hardware space with the company’s Gaudi 3 accelerator – but more on that topic in a minute. In conclusion, Sereda wouldn’t write Intel off prematurely and sees Intel’s situation as “not that bad.” Additionally, he views the “sharp sell-off we saw in INTC stock price” as an “overreaction.” With that, he upgraded Intel stock to a Buy rating, and I concur with his assessment 100%.
New Chips, New Chances to Succeed
Circling back to the topic of Intel’s Gaudi 3 accelerator, the company revealed during the Computex trade show in Taiwan that a kit including eight Gaudi 3 processors will have a list price of $125,000. If that sounds like a high price, bear in mind that Intel said it’s two-thirds the price of competitors’ comparable products. Plus, according to Bloomberg, Intel declared that Gaudi 3 “would be as much as two times faster than Nvidia’s H100 in executing AI inferencing tasks.”
Moreover, Intel unveiled its new Xeon 6 data-center processors at the Computex event. The company touted these processors as offering up to 4.2 times the “rack level performance” of older chips.
Not only that, but Intel CEO Pat Gelsinger confidently took a verbal shot at the almighty Nvidia during the Computex event. Referring to Nvidia CEO Jensen Huang, Gelsinger stated, “Unlike what Jensen would have you believe, Moore’s Law is alive and well.” This, presumably, is Gelsinger’s way of declaring that Intel will play a major role in the growth of the AI chip industry.
I’m glad to see Gelsinger taking an assertive stance against the seemingly invulnerable Nvidia. Yet, in the wake of Intel and Gelsinger’s presentation at the Computex event, INTC stock went down slightly instead of shooting higher. Don’t be disappointed, though, since it means there’s still a window of opportunity to consider buying Intel shares near $30.
Is Intel Stock a Buy, According to Analysts?
On TipRanks, INTC comes in as a Hold based on three Buys, 26 Holds, and three Sell ratings assigned by analysts in the past three months. The average Intel stock price target is $37.87, implying 26% upside potential.
Conclusion: Should You Consider Intel Stock?
Surprisingly, there was no Intel share-price rally after the company rolled out its new, powerful Xeon 6 processors. It just feels like Wall Street isn’t ready to let Intel out of the doghouse yet.
Just remember, though, that the Intel share price zoomed above $50 the last time investors let Intel out of the doghouse. So, thank your lucky stars that Intel is still out of favor right now. All in all, I am absolutely bullish on INTC stock and would consider buying it today.
