It appears we’ve entered a new age of investing. The prevailing sentiment seems to be, "Out with the old and in with the new."
Intel (INTC) is a technology company which finds itself on the “old” end of the spectrum. Some investors seem to simply believe this is a company of the past. When compared to competitors such as Nvidia (NVDA) or Advanced Micro Devices (AMD), we can see how this is the case. Looking at these companies’ respective stock charts tells a rather interesting story.
Indeed, increased competition in the chip market has eroded Intel’s market share and margins in recent years. With investors focusing on growth over stability, AMD and Nvidia are two examples of companies that have seen their share prices skyrocket, at the expense of Intel. (See Intel stock chart on TipRanks)
Let’s discuss whether Intel could in fact be a decent value pick in this environment. After all, at some level, even the most attractive growth stocks become overvalued relative to the “old guard.”
New CEO Means New Growth Trajectory?
Investors in Intel saw some pretty impressive momentum through the end of Q1 this year. Much of the reason for the increase in INTC stock was the hiring of Pat Gelsinger, who came on as the company’s CEO in mid-February.
Indeed, the company’s new chief has proposed some intriguing strategic shifts for investors to consider. During the CEO’s first extended public appearance in March, he indicated that Intel was intent on doubling down on its manufacturing capabilities.
How big was this double down?
Well, Mr. Gelsinger proposed investing as much as $20 billion into two new chip manufacturing facilities in Arizona. He dubbed this strategic move as one which will reinvent the company. In his words, “Intel is back. The old Intel is now the new Intel.”
Sounds good to many investors.
Indeed, years of outsourcing to countries like Taiwan has destabilized domestic production in the U.S. In fact, approximately two-thirds of the world’s chip manufacturing capacity exists in Taiwan, according to some sources.
As one of the few remaining players with a substantial manufacturing footprint in the U.S., Intel stands well-positioned to benefit from Democratic investments policies in the domestic production of essential goods. Some speculation has arisen that Intel could potentially successfully lobby the Biden Administration for government funds to support the company’s massive investments in U.S. manufacturing capacity.
For investors in INTC stock, that could be a huge win indeed.
New Infrastructure Processing Units
On Monday, Intel announced the introduction of its new Infrastructure Processing Unit, or IPU. Intel believes this IPU, in combination with the Xeon processor, can offer “highly intelligent infrastructure acceleration.”
According to the company’s EVP of the Data Plaforms Group, Navin Shenoy, “There is a need for silicon solutions that act as a control point across the cloud infrastructure to accelerate that overhead portion – the infrastructure functions. We call this silicon solution a new unit of computing: the infrastructure processing unit.”
The company is reportedly partnering with leading cloud players such as Microsoft (MSFT), Baidu (BIDU), JD.com (JD), and VMware (VMW) to roll out this intelligent infrastructure acceleration. Hyperscale clients stand to benefit from this integration via reduced overhead and improved CPU performance.
The degree to which adoption of these IPU products becomes mainstream remains to be seen. However, this is a key growth driver that investors have their eyes on right now.
What Analysts Are Saying About INTC Stock
According to TipRanks’ analyst rating consensus, INTC stock comes in as a Hold. Out of 31 analyst ratings, there are 12 Buy recommendations, 11 Hold recommendations, and 8 Sell recommendations.
As for price targets, the average analyst Intel price target is $66.31. Analyst price targets range from a low of $42.00 per share to a high of $85.00 per share.
Intel is a chip manufacturer with a long and storied history. It’s one of America’s leading players in high-tech manufacturing, and has been for decades. However, the allure of younger and more aggressive growth plays in this sector has taken a lot of luster away from Intel as a viable tech holding for many investors.
That said, it’s clear Intel has a vision for an innovative future. If the company can indeed execute on its mission and grow its U.S. footprint in this favorable political environment, perhaps this is a stock that could once again take off.
Disclosure: Chris MacDonald held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.