Is Intel stock a buy?

intel‘S (INTC 1.85%) Business has been declining in recent years. The company was the king of the chip market and dominated central processing units (CPUs) with lucrative partnerships such as: apologize. But the onslaught of new competition and the end of its relationship with Apple forced the company to rethink its business model.

Intel’s stock has fallen about 28% over the past two years as the market points to Intel’s headwinds. In response to these challenges, Intel has begun a major transformation that could be an excellent long-term investment.

The tech giant is shifting its business to prioritize a digital foundry model, which will likely make it the largest semiconductor company in the U.S. and Europe. Meanwhile, Intel is investing heavily in the emerging artificial intelligence (AI) industry.

So here’s why Intel doesn’t need to buy it right now.

CHIPS Act’s Key Beneficiaries

Two years ago, President Joe Biden signed the CHIPs Act, a plan to expand the nation’s semiconductor manufacturing capacity by investing $53 billion in the world’s leading chipmakers. And finally the funds began to disperse.

On April 15, the Biden administration announced plans to provide $6.4 billion to Samsung to expand Intel’s manufacturing facilities in the U.S., and is expected to follow suit soon. Intel has been allocated $8.5 billion, which will help build four new facilities across the country.

The chips will make it easier and more cost-effective for U.S. technology companies to build a wide range of devices, including consumer goods, automobiles, data centers, and hardware for AI.

Intel said last year that its shift to an internal foundry model would save the company up to $10 billion by 2025 and would be “the most significant change in its 55-year history.” The tech giant also said the changes will improve efficiency and profitability, potentially helping it achieve non-GAAP (adjusted) gross margins of 60% and operating margins of 40%.

Intel is gradually expanding its presence in the $200 billion AI market.

In addition to major changes to its business model, Intel is making AI a key focus in many of its products.

The AI ​​market was valued at less than $200 billion last year, but is expected to expand at a compound annual growth rate (CAGR) of 37% through 2030. Dozens of technology companies have shifted their businesses to high-growth sectors as part of their efforts. It’s about leveraging the enormous potential of AI. And Intel followed suit.

But what sets Intel apart is its long history in the chip market, with 55 years of experience as a chip manufacturer. In fact, the company holds 63% of the CPU market despite the rise of competitors. advanced micro devices.

Intel has been a bit late to the AI ​​sector, with most of its past focus being on CPUs. Meanwhile, building AI models primarily requires graphics processing units (GPUs). As a result, the GPU leader nvidia‘s business grew explosively last year without much competition. However, Intel plans to challenge Nvidia’s market share with its own AI GPU in 2024.

Last year, Intel unveiled the Gaudi 3 AI GPU. The chip was launched this April, and the company announced that it outperforms Nvidia’s GPUs by 50% in inference and 40% in power efficiency.

Intel could benefit from AI market tailwinds for several years, making its stock an interesting option this month.

One of the most valuable AI stocks around

that much NASDAQ-100 Technology Sector The AI ​​index is up about 40% in the past 12 months, mainly due to expectations about AI. However, the expected growth of the market means it is not too late to invest.

Meanwhile, chip stocks are one of the best ways to invest in AI, and these companies are developing the hardware that makes generative technology possible.

Data from YCharts

This chart shows that Intel is potentially the most valuable AI chip stock. Intel’s future price-to-earnings and price-to-sales ratios are significantly lower than those of fellow chipmakers Nvidia and AMD.

These numbers make Intel affordable compared to its competitors. As the company transitions to a digital foundry model and expands its presence in the AI ​​space, Intel’s stock is worth considering before it’s too late.