Another reason to buy Intel stock: AI car chips

The change in sentiment on Wall Street toward Intel (NASDAQ:INTC) stock has been surprising. A year ago, analysts and stock traders declared Intel a company in decline. Now they are constantly giving reasons to raise their price targets.

It’s not just a figure of speech. Analysts at Truist, Mizuho, ​​and Tigress Financial all raised their price targets on INTC stock. This is a surprising turn of events, considering Intel was once the butt of ridicule as it lost market share to Advanced Micro Devices (NASDAQ:AMD).

However, Intel regained market traction in the second half of 2023 when CEO Pat Gelsinger shifted focus to artificial intelligence (AI) chips. You may have heard that Intel is going all-in on AI chips for personal computers (PCs). But this isn’t the only big move the company will make in 2024.

Intel’s groundbreaking acquisition

For the most part, Intel’s “AI Everywhere” strategy includes a push to develop AI chips for PCs. But at the recent Consumer Electronics Show in Las Vegas, the chipmaker announced an acquisition that will bring its “AI everywhere” theme to cars and trucks.

Yesterday, Intel announced at CES that it is acquiring fabless silicon and software company Silicon Mobility. France-based Silicon Mobility produces systems on chips (SoCs) for intelligent electric vehicle (EV) energy management.

This was big news in what Barron’s described as “an almost news-free press conference at the CES trade show.” If the event felt like an “AI pep rally,” Intel was certainly one of the leading cheerleaders with its announcement of its Silicon Mobility acquisition.

Of course, Intel executives haven’t lost sight of the fact that there are people who can hear the focus on AI-compatible PC chips.

“AI is everywhere and is transforming, reimagining and reinventing the PC experience,” declared Michelle Johnston Holthaus, general manager of Intel’s Client Computing Group at CES.

But the Silicon Mobility acquisition will allow Intel to get its high-performance chips into people’s cars, as well as outside the home and office. Financial terms of the acquisition are not yet publicly known, but Intel’s foray into intelligent SoCs for EVs signals the potential for a new and significant revenue stream.

Does your car have an AI PC?

The planned acquisition of Silicon Mobility wasn’t Intel’s only announcement at CES that raised eyebrows. The company also said it wants to bring its AI PC experience to cars.

Don’t take this too literally. Intel says it doesn’t intend to install PCs in cars or trucks, but wants to leverage the “AI acceleration capabilities” of its PC chips to “enable the most desirable in-vehicle AI use cases, such as driver and passenger monitoring.” .”

All of this may sound futuristic and even absurd. But it’s already becoming a reality, as Intel has already found major automotive clients for its PC-style automotive AI chips.

Zeekr, a Chinese automaker owned by Geely (OTCMKTS:GELYY), will use Intel’s software-defined vehicle (SDV) SoC. Intel claims this will “bring an enhanced GenAI living room experience to next-generation vehicles.”

Intel’s press release didn’t provide much color on what exactly an in-vehicle AI-enhanced “living room experience” would look like. However, Intel and Zeekr have stated that it will “enable the next generation of experiences that customers demand, such as generative AI-powered voice assistants.” Additionally, Intel Automotive general manager Jack Weast suggested in a briefing with reporters that Gen-AI voice assistants for cars could help drivers find nearby EV chargers or Starbucks (NASDAQ:SBUX). It is known that.

Do car and truck buyers really “demand” Gen-AI voice assistants? The press release is not a PhD thesis, so investors shouldn’t expect Intel to provide research-based evidence for it. However, it remains to be seen whether the AI-enabled ‘living experience’ will set a new standard in car buyer expectations.

What This Means for INTC Stock Investors

Clearly, Intel made a splash at CES with its announcement of its acquisition of Silicon Mobility and talk of an in-vehicle “GenAI living room experience.” At the very least, this indicates that Intel won’t just sit back and let AMD, NVIDIA (NASDAQ:NVDA), and other competitors dominate the future of the automotive AI chip market.

That in itself is not a good enough reason to buy and hold INTC stock. Automotive AI chips could provide a revenue stream for chip manufacturers, but that’s not the whole story. This is just another factor to consider if you’re already optimistic about Intel’s long-term recovery story. This story could take years to come to fruition.

disclaimer: All investments involve risk. Under no circumstances should this article be taken as investment advice or constitute liability for investment profits or losses. The information in this report should not be relied upon for investment decisions. All investors should conduct their own due diligence and consult their own investment advisors when making trading decisions.