Should investors buy Intel stock after its return?

What a difference a few quarters can make! Earlier this year, Intel (NASDAQ:INTC) became a virtual pariah on Wall Street as it lost market share to Advanced Micro Devices (NASDAQ:AMD) and NVIDIA (NASDAQ:NVDA). But now Intel is receiving love from the market and its stock price is soaring.

It’s okay for value-driven investors to support the underdog. But what about everyone’s favorite underdog from the past now? Naysayers may bristle at the idea of ​​buying INTC stock now, but it could still be good value for investors.

Ultimately, if Intel can successfully compete with AMD and all-powerful Nvidia in the artificial intelligence (AI) chip war, the ‘Magnificent Seven’ club may need to make room for its eighth member in 2024.

Intel unveils powerful products

Integral to Intel’s follow-up next year is a new line of AI-enabled products. On this topic, Intel took direct aim at AMD and NVIDIA at its recent AI Everywhere event.

At this event, Intel unveiled its next-generation Core Ultra processor for laptops. As you might expect, Intel executives emphasized the Core Ultra lineup’s compatibility with AI applications.

“The launch of Intel Core Ultra represents the unparalleled scale and speed at which Intel is enabling AI on the PC. Intel is best positioned to deliver this next generation of computing,” said Michelle, general manager, Client Computing Group. Michelle Johnston Holthaus said: Intel.

According to Barron’s, Intel claimed that “more than 100 software vendors have optimized their applications with AI-related features leveraging Core Ultra.” Perhaps this means that the market for laptops with AI applications is robust and Core Ultra is essential to its future growth.

But Core Ultra isn’t really Intel’s flagship product in the AI ​​hardware arms race. A more impactful product is the 5th generation Xeon processor, which the company also showcased in AI Everywhere.

This product is Intel’s answer to NVIDIA’s AI-compatible chips. Unlike Core Ultra, Xeon is not exclusive to laptops or personal computers (PCs).

“The 5th Gen Intel .”

Xeon will not put NVIDIA and Advanced Micro Devices out of business by any means. Nonetheless, Intel could actually pose a major threat to NVIDIA’s AI processor dominance with this new product. Specifically, Intel (Barron’s) claims that its latest Xeon chips “deliver a 21% increase in performance over its predecessor and a 36% increase in performance per watt.”

Is Intel’s stock price worth $50?

It seems like just yesterday INTC stock was trading at $24, but there has been a change. This actually happened in early 2023. Back when financial experts were joking that AMD was eating Intel’s lunch in the U.S. chipmaker market.

It turns out that $24 and change is a great price to buy Intel stock, which has recently surged above $50. This is a stark reminder that yesterday’s laggards can sometimes become today’s leaders.

Of course, Intel is not the clear leader in the AI ​​chip war, but the market seems to expect it to catch up in the coming quarters. Since the market is forward-looking, it may have already priced in Intel’s stock rebound.

This is a legitimate concern for value-focused investors. Intel’s non-GAAP forward P/E ratio is approximately 50, which is double the industry average forward P/E ratio.

However, I would venture to declare that INTC is a bargain even at current valuations. Intel CEO Pat Gelsinger said his company has submitted proposals for projects worth “more than $100 billion” to the U.S. Department of Commerce to take advantage of the Chip Act. If even some of these projects receive government support, they could provide a major source of revenue for Intel for years.

As for government support, Intel just received approval from the Israeli government to build a chip manufacturing plant there. If all goes as planned, Intel will invest $25 billion while also gaining a significant presence in the Israeli chipmaker market.

So there are probably more chapters to Intel’s comeback story. Additionally, INTC stock has not yet reached all-time highs, or even 2021 highs. So as we approach the end of a strange year for tech stocks, contrarians may want to consider their most contrarian calls. In other words, invest in Intel even if others are investing in Intel.

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.