INTC Stock Analysis: 2 Reasons to Buy Intel Now

Stocks to buy

Once a chip stock that’s been on the outside looking in, Intel (NASDAQ:INTC) stock has actually been performing quite well over the past year. Investors looking for a more cost-effective option to play growth in the semiconductor space have increasingly looked to this U.S. company, which doesn’t boast the same growth rates as Nvidia (NASDAQ:NVDA) or AMD (NASDAQ:AMD), but certainly has the kind of sales base and profitability many companies dream of. This will have important implications for INTC stock investors moving forward.

However, after Intel’s impressive run, in which the stock nearly doubled last year, the question is how much higher the stock can run from here. Indeed, the company’s recent outlook did not match up to Wall Street’s expectations. And Intel aims to put forward substantial capital into domestic chip development, something its peers don’t seem willing to do at this scale right now. That’s an expensive proposition, so INTC stock may need to be a long-term holding, for investors to truly reap the benefits of owning this stock at current levels.

Here’s the bull case behind why that may be a good idea, with two solid reasons to consider owning Intel right now.

Altera is Back

Nine years after its $16.7 billion acquisition, INTC stock is spinning off field programmable gate array (FPGA) maker Altera as an independent entity, restoring its original brand. Sandra Rivera, former Intel data center division head, assumes Altera’s CEO role. She anticipates Altera’s FPGA business, now standalone, to target a $55 billion market in the coming years. The company has also expanded its partnerships and product lines, including the Agilex 3 series, marking Intel’s broader market entry.

Rivera highlighted Intel’s diverse portfolio catering to various market needs, from high-performance to cost-sensitive environments. Appointed head of the data center and AI group in 2021, Rivera successfully steered the group back on track, ensuring timely releases of key processors like Sapphire Rapids and its successor, Emerald Rapids.

Intel recently rebranded its Agilex line to align with Core processors, featuring Agilex 3 to 9 models. Agilex 9 is in total production, while Agilex 7 and I-series are released. Agilex 5 boasts 1.6x better performance per watt. Upcoming Agilex 3 targets low-power applications for cloud and edge. This contrasts AMD’s acquisition of Xilinx, which is fully integrated into its product lineup and boosts FPGA sales.

Analyst Jim McGregor acknowledges Intel’s mixed record in acquisitions but praises Altera’s prospects. He sees Intel’s shift to FPGA as part of a broader strategy change under Gelsinger, focusing more on competing in the foundry business against TSMC than AMD and Nvidia. McGregor predicts mutual benefits from the technology exchange between Intel and Altera.

Strong Bet for Both Short and Long-Term

Intel’s potential lies in its gradual growth trajectory, particularly with its foundry business. Despite setbacks, like delays in facility construction, optimism regarding this catalyst could resurface with positive updates.

Updates on Intel’s access to US federal subsidies under the CHIPS Act are crucial. While not an immediate surge, they could aid share recovery post-selloff. The success of Intel’s foundry venture may be evident in late 2025, considering build-out and market recovery timelines.

Apart from potential share gains linked to the foundry catalyst, increasing confidence in Intel’s AI catalyst fuels bullish sentiment. The AI chips growth trend, particularly in AI-PC chips, may lead to further market excitement. Intel’s Gaudi3 AI accelerators aim to challenge Nvidia’s dominance, with potential in AI-compatible CPUs. Intel could ship up to 100 million AI-PC CPUs by 2025.

Buy INTC Stock Now

Intel’s server-chip business benefits from the AI Boom, with record Xeon chip prices. New Xeon chips integrate AI acceleration in every core, boosting performance and reducing costs. Xeon leads mainstream data center processors in AI acceleration, with the latest offering 42% higher inference performance. 

Additionally, Intel consistently surpassed top-line, gross margin, and EPS targets for consecutive fourth quarters—cost-saving efforts aimed for $3 billion in savings by 2023. Enhanced operational performance despite challenges signifies enduring value growth, making Intel a top blue-chip stock to consider buying at current levels as an AI-adjacent growth story.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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