Back when chip stock Intel (INTC) was first getting its foundry aspirations together, some thought that Intel was blowing a big pile of money to not get much out of it. New reports suggest that the roughly $100 billion that Intel plowed into the process, though, may have paid off staggeringly well. But investors were skeptical, based on the nearly 3.5% loss seen in Intel shares in Tuesday afternoon’s trading.
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There are signs that Intel Foundry is making headway. The 18A process node is in commercial manufacturing, and 14A may not be too far behind. Multiple clients are coming in on Intel’s side, and the federal government considers Intel plants to be “strategically essential,” reports note.
Throw in the chip shortage seen worldwide, and the fact that the global semiconductor industry is set to pass $1.6 trillion by 2030, Intel could stand to receive billions in revenue with even a small part of that market. Since Intel’s net margin is 25%, reports note, that could allow Intel to realize billions in profit. And with a 25x valuation on the foundry sector, reports note, that puts valuation on it squarely in the half-trillion range, which is nearly double the $300 billion that represents Intel’s market capitalization.
Working on the Edge
Edge computing is a growing part of many companies’ networking operations. And Intel is stepping in as part of a coalition effort to improve edge operations. Intel joins Dell Technologies (DELL) and Nokia (NOK) to bring out a new User Plane Function (UPF) device that should improve workload flow across networks.
The UPF in question is driven by Intel’s Xeon 6 processor, which offers edge locations access to artificial intelligence (AI) capabilities. This represents a major potential advance, particularly in the telecom sector, where high-end processing at long distance is increasingly valuable.
Is Intel a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on six Buys, 24 Holds and four Sells assigned in the past three months, as indicated by the graphic below. After a 228.36% rally in its share price over the past year, the average INTC price target of $52.52 per share implies 16.86% downside risk.
