Industry watchers’ comments have continued to pour in after top chip designer Nvidia (NVDA) disclosed its $5 billion equity investment in Intel (INTC) on Thursday. Cody Acree, a five-star analyst with financial services firm Benchmark Co., has called the deal a “significant fundamental tipping point” that will boost Intel’s long-term market positioning.
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Under the deal, both chip makers will work together to build custom central processing units (CPUs) and new chip platforms. One key goal is to integrate Intel’s x86 CPUs with Nvidia’s graphics processing units (GPUs) using the latter’s NVLink technology, which enables rapid communication between both units.
‘A Strong Vote of Confidence’
According to Acree, Nvidia’s roughly 4% stake in Intel, which makes Nvidia one of Intel’s biggest shareholders, signifies a “strong vote of confidence” in Intel’s development. The analyst encouraged investors to use any weakness that follows Intel’s rally—the stock soared 23% on Thursday—as an opportunity to build long-term positions on the American chip designer’s shares.
Furthermore, Acree rated INTC stock with a Buy at a price target of $43 that suggests a 40.66% upside potential. The analyst boasts of a 66% success rate, an average return of 22.40%, and is ranked 120 out of 10,026 Wall Street analysts, as seen on TipRanks.
Analysts Weigh Impact
Meanwhile, other analysts have also rendered their observations on the deal.
DA Davidson’s top analyst Gil Luria called it “a strategic win” for both companies, arguing that Intel will gain stronger backing from Washington and the tech industry, along with more demand for its chip packaging services. On the other hand, Nvidia gets to keep its lead in AI by ensuring supply and support across the wider chip market.
However, assessments of the possible impact on other chipmakers and manufacturers have been divided. TD Cowen’s Krish Sankar maintained that the deal will have long-term implications for contract manufacturer Taiwan Semiconductor (TSM) and chip designer Arm Holdings (ARM). However, Jonathan Weber, the Investing Group Leader for Cash Flow Club, noted that although Intel might increase its production in the future, Taiwan Semiconductor still holds a significant lead as the top manufacturer and remains well ahead for the time being.
Meanwhile, Lynx Equity sees the deal as “clearly a negative” for Advanced Micro Devices (AMD), while Stifel (SF) views the impact as only modest, even if a tougher landscape is ahead. Lynx pointed out that the collaboration impact Advanced Micro Devices’ supply of x86-compatible CPUs to Nvidia.
Is Intel a Buy or Sell Now?
Across Wall Street, Intel’s shares have a Hold consensus rating based on one Buy, 26 Holds, and three Sells assigned by 30 Wall Street analysts over the past three months. The average INTC price target of $23.61 suggests a possible 23% downside risk.
