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The Next Nvidia: Intel?

If you're considering jumping into the chip trade, the obvious choice is Nvidia (Nasdaq: NVDA), which has skyrocketed 2000% in the last five years thanks to its role in the artificial intelligence boom. But the stock is currently sitting at an all-time high of $942.89, and it seems the time to get in on that action may have passed.

Let's look at Intel (Nasdaq: INTC) as a potential alternative to the soaring Nvidia. Ah, poor Intel. It's been lagging behind Nvidia and other chip stocks, with its stock down 20% in the last five years. The stock is currently trading at $42.57, which is, well, not exactly impressive. 

But hold on, because there might be a glimmer of hope on the horizon.

Just this week, the Biden-Harris Administration dropped a bombshell announcement. Intel and the U.S. Department of Commerce have signed a non-binding preliminary memorandum of terms (PMT) for up to $8.5 billion in direct funding to Intel for commercial semiconductor projects. This funding is through the CHIPS and Science Act. Intel also plans to claim the U.S. Treasury Department's Investment Tax Credit (ITC), which could be up to 25% of qualified investments totaling over $100 billion in the next five years.

Now, this CHIPs Act deal is huge, and the fact that Biden picked Intel over its competitors is incredible. We're talking about one of the largest public-private investments ever made in the U.S. semiconductor industry. It looks like Intel's comeback party is underway.

Global Equities Research analyst Trip Chowdhry was so impressed by this CHIPS Act announcement that he raised his price target on Intel’s stock to $100. That's some serious optimism right there.

But here's the kicker – despite all this exciting news, Intel's stock didn't exactly skyrocket. 

So, should you consider Intel stock? That massive CHIPS Act investment is huge for Intel, but the company has lagged for years.

Let's break down the bull case and the bear case for Intel.

The Bull Case

Despite the challenges faced in recent years, Intel has shown promising signs of a turnaround.

The stock is up 44% in the last 12 months because of the AI hype.

Intel's fourth-quarter revenue in 2023 reached $15.4 billion, surpassing expectations for the fourth consecutive quarter. With a 10 percent year-over-year growth, it's clear that Intel is on an upward trajectory. 

The company was also profitable in the fourth quarter of 2023. This year, Intel expects to grow sales every quarter.

But it's not just about the numbers; Intel has big plans for the future with their goal of achieving five nodes in four years. Nodes refer to the measure of the size of a chip's transistors.

Meanwhile, CEO Pat Gelsinger’s plan is for Intel to become a major chip foundry. Eventually, Intel plans to design and build its chips, which is something that even Nvidia doesn't do.

In the world of AI, Intel is making significant strides. Adoption for OpenVINO, Intel’s open-source software toolkit, grew by 60% sequentially in the fourth quarter. This software layer for AI inference is becoming a core component in various sectors, from edge computing to data centers. 

Let's not forget that Intel owns Mobileye Global (Nasdaq: MBLY), an autonomous driving company. With the future of transportation heading towards self-driving vehicles, Intel is positioned to ride the wave of innovation. 

And last but not least, Intel is getting all that CHIPS Act money. With this financial boost, Intel has the resources to fuel its ambitious plans and soar to new heights.

The Bear Case

Before you jump on the bandwagon, let me present you with the bear case against investing in this tech giant.

First and foremost, Intel's full-year revenue for the entire year in 2023 was down 14% because of a bad first half of 2023. And Intel’s revenue outlook for the current quarter is lower than what analysts expected.

The company also offers a dividend, but even when you factor that in, the overall investment for Intel is still down over the last five years.

Intel has been playing catch-up with chips for years, and it's starting to feel like a never-ending game of tag. While competitors like AMD (Nasdaq: AMD) and Nvidia are sprinting ahead, Intel is stuck in the slow lane, struggling to keep up. 

Finally, let's address the elephant in the room: Intel's negative free cash flow. They're spending money left and right to transform their business, but it seems like they're just throwing cash into a black hole. 

Comparing the Field

Intel’s stock price is $42.57(-10.94% in 2024).

And Intel’s competitors:

Nvidia’s stock price is $942.89 (+95.75% in 2024).

AMD’s stock price is $179.65 (+29.64% in 2024).

Arm Holdings’ stock price is $134.15 (+94.65% in 2024).

Lattice Semiconductor’s stock price is $79.68 (+16.49% in 2024).

Taiwan Semiconductor’s stock price is $140.54 (+38.42% in 2024).

From the Expert Analysts

According to the 36 Wall Street analysts documented by TipRanks, Intel has a price target of $47.05, which is higher than the current price. Among those 36 Wall Street analysts, 8 listed the stock as a “buy,” 4 listed it as a “sell,” and 24 listed the stock as a “hold.” That means analysts are mixed.

According to analysts on Benzinga, Intel’s stock is listed as “neutral.” One bullish analyst predicts that the price could jump to $66 and a bearish analyst predicts that it could be as low as $17.

Machine Learning Prediction

The blue line is Intel’s price in the past year and the red line represents a machine-learning prediction from Early Bird for the next three months. The machine learning model is from Google algorithms and was trained on public stock data that Early Bird collected.

This machine learning model predicts Intel will rise to $44 by June.

Early Bird’s Flight Plan

Let’s be clear: Intel is not the next Nvidia. However, it is still a decent stock with a decent dividend yield of 1.12%.

Intel is a solid choice if you want to take a flier on a stock in the growing semiconductor field.

It may take some time for Intel to turn things around, but the stock should grow in the long run.

Thank you for reading!

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_{The contents of Early Bird are intended for informational and entertainment purposes only. They do not constitute trade or investment recommendations and they are not financial or legal advice. Readers are encouraged to consult licensed professionals for personalized guidance regarding their financial or legal situations.}