Intel Corporation NASDAQ: INTC ended the year with a ton of baggage and a beaten-down stock price. Shares had given up more than 60% in less than two years, and the chip giant had been under increasing pressure from investors to get it together.
However, it’s looking like shares have managed to put in a low as the bears look to have run out of steam, for now, at least. Let’s see what kind of tailwinds might support the thesis that shares could soon break out.
For starters, Intel is splitting up its graphic chips unit into two to better compete with other big chip names like NVIDIA Corporation NASDAQ: NVDA and Advanced Micro Devices, Inc. NASDAQ: AMD, who together are leading in the AI-based chip industry. For the most part, Wall Street has been happy with this move by leadership, who in the past have come under fire for doing seemingly nothing to arrest the loss of market share.
Raja Koduri, who leads the graphics chip unit at Intel, made the decision. He’d previously led the graphics technology ventures at Apple NASDAQ: AAPL and feels like a much-needed safe pair of hands right now to help spark a comeback.
As of making a comeback, Bitcoin’s 30% rally this year has caused shares of HIVE Blockchain Technologies Ltd (NASDAQ: HIVE) to jump almost 150%. If you’re wondering what this has to do with Intel, stick with us and keep in mind that Intel’s chips power HIVE’s mining machines.
The primary knock-on effect of a comeback in Bitcoin, and crypto overall, is increased profitability from mining, which increases demand for the chips that power it. If some of Intel’s weakness last year can be tied to the crypto sell-off, then a continued turnaround should also be a tailwind for Intel in the months ahead.
In addition, the state of the US chip industry has caught the attention of President Biden, who is set to further promote American semiconductor companies in a series of upcoming summits with Canadian and Mexican world leaders.
Biden hopes to drive outside investment into domestic chip facilities in the wake of supply chain disruptions across China and other parts of Asia. The goal here is to incentivize world leaders to coordinate supply chain operations in the US so they no longer have to rely on facilities in Asia to provide the needed products.
So while there are fundamental reasons to think bullishly about Intel, risks that need to be noted exist. The team at Bank of America recently lowered their PC estimates for the first half of 2023, which came off some industry checks.
In addition, analyst Vivek Arya reiterated his Underperform rating on the stock and lowered his 2023 EPS estimates by 9%. This was primarily based on the company’s soft guidance, and he added in a note to clients that “there are additional concerns of Intel pricing its products more aggressively to capture share and taking advantage of incremental capacity.”
For investors looking for higher quality names in the space, they needn’t go much further than the aforementioned AMD, whose stock Arya has rated as a Buy.
But with a price-to-earnings ratio of just 9 versus AMD’s 41, investors will feel they’re getting a bargain with Intel as low as it is. And with December's low having failed to break below October's lows, we’re now seeing a technically bullish situation develop, which will support an upward trend.
Intel may have spent the past three years with the bears, but it’s looking like the bulls are ready to be back in the market. If shares can get above $30 and hold that line, they’re in a good position to capitalize from further industry-wide tailwinds and company-specific initiatives.
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