There were those who thought that the chip stock rally in recent days may be losing steam. But the market suggested otherwise, and chip stock Intel (INTC) saw a significant surge as the market proved the gains were not as ephemeral as some might have thought. Intel shares surged up nearly 7% in Wednesday afternoon’s trading.
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Reports emerged, suggesting that the central processing unit (CPU) market was likely to surge in growth. The market is looking at an annual expansion rate of 35%, eventually reaching $132 billion by 2030. Quite a bit of that demand will come from the usual sources: hardware for regular users, business hardware, processors in smart devices and the like. But a major part of that demand will come from artificial intelligence, which as we know has been pivoting away from graphics processing units (GPUs) over to the CPU trade.
One comment from an analyst—Jay Goldberg at Seaport—noted that some chip companies were starting to “…get..ahead of their fundamentals.” But Intel was not one of them. Goldberg looked for Intel to keep right on growing to keep up with projections, and he was not alone on that front. Benchmark analyst Cody Acree—who has a five-star rating on TipRanks—declared that investors were underestimating Intel’s earnings capacity.
More Customers Waiting
Intel’s foundry division is also starting to make good. With multiple clients already looking to come in and buy processors from the foundry operations, more are actually waiting in the wings. Current CEO Lip-Bu Tan noted that “multiple customers” have engaged with Intel, and process improvement from both the 18A and 14A nodes are attracting interest.
Tan noted, “Now some of the customers are coming knocking on my door, saying Lip-Bu, can you now open up also for outside customers. And that is very exciting.” Which, indeed, it is, as it represents a hefty new slug of potential business at a time when nearly every chip stock is fully engaged in the field.
Is Intel a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on 11 Buys, 24 Holds and three Sells assigned in the past three months, as indicated by the graphic below. After a 435.52% rally in its share price over the past year, the average INTC price target of $87.09 per share implies 26.11% downside risk.
