For investors looking to get more diversified exposure to the chips sector, Intel (NASDAQ:INTC) is one company that’s often considered. This chipmaker surged during the dot-com bubble but has struggled to reach new highs. Not even the pandemic-driven tech surge could take INTC stock to new highs.
Chip demand has surged, but competition has increased in the higher-end market. Of course, Nvidia (NASDAQ:NVDA) is the talk of the sector, having recently overtaken Apple (NASDAQ:AAPL) for second spot in the market capitalization rankings this week.
Additionally, INTC stock has been on a consistent decline since the end of last year, after the company reported disappointing Q1 results. Q1 sales rose 8.5% and client computing unit sales increased by 31%, but the company’s forward outlook was uncertain. Intel is heavily investing in key projects with unknown ROI.
For those looking to take a bullish angle on Intel, let’s dive into what investors should watch moving forward.
INTC Stock: New AI Chips on the Way
During the Computex tech conference in Taiwan, Intel revealed its latest artificial intelligence chips for data centers. CEO Pat Gelsinger highlighted that the new Xeon 6 processor offers enhanced performance and power efficiency compared to its predecessor, targeting high-intensity data center tasks.
Amid increased competition with Nvidia and AMD (NASDAQ:AMD), Intel announced new AI chips, following their launch of 5th Gen Intel Xeon processors and Gaudi 3 processor.
The company also disclosed lower prices for Gaudi 2 and Gaudi 3 AI accelerators compared to competitors. CEO Gelsinger emphasized customers’ demand for cost-effective AI solutions, revealing upcoming Lunar Lake processors targeting AI PCs.
Intel is playing catch-up with Nvidia and AMD after sitting out the AI frenzy dominated by Nvidia chips.
Unlike its competitors, Intel handles both chip design and manufacturing. However, its foundry business faced challenges, recording a $7 billion operating loss in 2023, and losing ground to overseas rivals.
Lunar Lake
Intel unveiled technical details of its upcoming Lunar Lake chips at Computex. These chips will deliver up to 48 TOPs of AI performance, an upgrade from previous models. Competitors like AMD are also intensifying the AI race with their Ryzen AI 300 chips.
The chip promises significant upgrades, including an 80% faster GPU for gaming and an additional 67 TOPS of AI performance.
Lunar Lake chips will introduce onboard memory, resembling Apple Silicon, available in 16GB or 32GB configurations, with no option for expansion. This design choice reduces latency and power usage by 40%. Intel plans to address RAM limitations with its next chip family, Arrow Lake.
Moreover, Lunar Lake features eight cores, including performance and efficient cores, along with an advanced low-power island for background tasks, improving battery life by 60% compared to Meteor Lake.
Intel and AMD aim to rival Qualcomm’s Copilot+ hardware, known for its impressive battery life.
Collaboration with Apollo
Intel and Apollo finalized an $11 billion deal wherein Apollo-managed funds acquire a 49% equity stake in a joint venture entity linked to Intel’s Fab 34. This marks Intel’s second Semiconductor Co-Investment Program deal, aligning with its Smart Capital strategy to enhance financial agility and bolster global manufacturing operations.
Intel and Apollo finalized an $11 billion deal, with Apollo acquiring a 49% stake in a joint venture related to Intel’s Fab 34 in Leixlip, Ireland. This move allows Intel to repurpose part of its $18.4 billion investment in Fab 34 while maintaining control and operational authority.
The agreement strengthens Intel’s financial standing by securing capital at a cost below its equity, boosting its flexibility for strategic investments.
INTC Stock Looks Intriguing
Intel has faced scrutiny for trailing competitors Nvidia and Advanced Micro Devices in CPU and GPU markets. Despite this, the company has also shown promising innovations, unveiling research in May for scaling silicon-based quantum processors.
With a forward earnings ratio of around 24.4-times, Intel appears to be a relative value play in the high-growth chip space that may be worth considering. Of course, many things have to go right for this bet to pay off. But for those willing to bet on the U.S.-based chip sector, this is one of the cheapest ways to do so.
On the date of publication, Chris MacDonald did not hold (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.
