We know that chip stock Intel (INTC) spent a long time playing catch-up as it lost out on a large part of the artificial intelligence (AI) arms race. But with AI shifting from training to inference, suddenly things are looking a lot brighter for Intel. Shareholders, however, were not quite feeling that level of optimism today. In fact, shareholders sent Intel shares slumping over 3% in Thursday afternoon’s trading.
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What was once bad news for Intel has now pivoted to some of the best possible news it could get. Originally, training AI meant using graphics processing units (GPUs), which were not a kind of processor that Intel did much with. But now, AI systems are shifting away from training and going toward inference work. Inference work depends much more on central processing units (CPUs), and that means opportunity for Intel.
When the demand for CPUs in AI is added on to the demand for CPUs literally everywhere else, from game consoles to regular computers and data centers and far, far beyond, this adds up to a major potential win for Intel. And this in turn is leading some to figure that the huge, huge run-up in Intel’s share price is actually a sustainable rally in progress. The idea that this is some momentary aberration is less likely the more you look at it.
A Downside to That
And the intense demand for Intel processors is actually visible with the Arrow Lake Refresh line’s release. It was believed that the arrival of these processors would prompt a price cut elsewhere. Not without reason, either, as the Arrow Lake Refresh was intended to be a boost to budget processors.
But with Intel even managing to sell scrap processors for premium prices, the fact that the Arrow Lake Refresh’s Core Ultra 5 225 is selling at $177 makes it about all the bargain that customers can get right now. The good news is that this processor is highly efficient, and does wonders in single-threaded applications. But it falters in multithreaded applications, which makes it less of a bargain at the price Intel is asking. Given the state of the processor market, though, this elevated pricing makes a grim sort of sense.
Is Intel a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on 11 Buys, 23 Holds and three Sells assigned in the past three months, as indicated by the graphic below. After a 438.14% rally in its share price over the past year, the average INTC price target of $80.16 per share implies 26.83% downside risk.
