Shares in Intel (NASDAQ: INTC) have climbed 116,000% since it went public in October 1971. The company was once the world's most prominent chipmaker, with leading market shares in key parts of the industry, like manufacturing and central processing units (CPUs). However, Intel has hit more than a few roadblocks over the last decade.
Its stock has gained just 9% since 2014 as it faced market-share losses, tumbling revenue, and the end of a lucrative partnership with Apple. Yet recent developments suggest Intel is at the beginning of a rebound.
Last year, Intel announced a "fundamental shift" in its business that will see it transform into a foundry model, taking on leading manufacturers like Taiwan Semiconductor Manufacturing Company and Samsung. Meanwhile, Intel is gradually expanding its range of artificial intelligence (AI) products, with plans to become the largest U.S. manufacturer of AI chips.
Intel has a solid outlook in the coming years as its restructuring progresses. Here's why it's not too late to buy Intel stock and why it's actually a screaming buy right now.
A range of new AI products
According to Grand View Research, the AI market is projected to expand at a compound annual growth rate of 37% through 2030, which would see it hit a valuation nearing $2 trillion. The massive growth potential is why countless tech companies have joined the industry and chip stocks have soared more than the last 12 months. (Nvidia, for example, has risen 223%.)
Nvidia's business exploded as its AI chips have become the gold standard for AI-minded companies seeking powerful hardware. Intel isn't as far into its AI journey as Nvidia, but recent developments see it making a play for a portion of Nvidia's AI chip market share.
On June 4, Intel took the stage at the Computex tech conference in Taiwan to announce a series of new AI-enabled chips. The company unveiled its Xeon 6 processor, which promises improved performance and power efficiency for intensive data center workloads. The launch comes just months after debuting its Guadi 3 AI accelerator, which was developed to rival Nvidia's offerings.
Additionally, Intel announced pricing for its Gaudi 3 and Gaudi 2, which will cost less than competing chips from Advanced Micro Devices and Nvidia. The move is a promising step in the right direction as Intel works to secure its place in the budding AI chip market.
Intel is setting itself apart from the competition by prioritizing manufacturing
New AI products strengthen Intel's outlook. However, its recent transition to a foundry business model will likely be the company's biggest growth driver in the coming years.
Allied market research shows that the semiconductor foundry market is expected to soon double in size, worth about $107 billion in 2022 and expanding at a rate that will see it achieve $231 billion by 2032. Meanwhile, Intel has plans to build at least four chip manufacturing plants throughout the U.S. on its way to becoming "the AI systems fab for the nation" (per CEO Pat Gelsinger).
Intel is in steep competition with Nvidia and AMD in AI chips. However, a move into manufacturing could set Intel apart from its rivals. While Nvidia and AMD focus on design, Intel has the unique opportunity to profit from the entire AI industry by becoming its go-to chip manufacturer.
An expansion into manufacturing won't come cheap and will cost Intel billions. However, recent earnings suggest the company is moving in the right direction. In the first quarter of 2024, Intel's foundry revenue increased by 4% year over year. Meanwhile, operating income for the segment came to $625 million, significantly improving on the $880 million in losses it posted the year before.
It'll take time for Intel to see a return on its investment in manufacturing, but it could pay off in a major way over the long term.
One of the best-valued stocks in AI
Data by YCharts.
This chart uses the forward price-to-earnings ratio (P/E) to compare the valuations of some of the most prominent companies in AI. This metric is calculated by dividing a company's current share price by its estimated future earnings per share; the lower the figure, the better the value. As a result, the data above shows Intel is one of the best-valued stocks in AI.
Considering Intel's expanding range of AI chips and venture into manufacturing, it's not too late to make a long-term investment in its stock.
Should you invest $1,000 in Intel right now?
Before you buy stock in Intel, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Intel wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $746,217!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of June 10, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Apple, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short August 2024 $35 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
