Undoubtedly, the word that chip stock Intel (INTC) was in line to land a major investment from rival Nvidia (NVDA) was one of the biggest things in markets this week. In fact, new reports suggest that this clear blessing will deliver a lot of impact to Intel, solving four out of its five biggest problems. But investors seemed concerned, as Intel shares slid over 3% in Friday afternoon’s trading.
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The good news is that Nvidia’s $5 billion solves a lot of problems for Intel. Capital expenditures are now quite well funded, and it will need that capital expense to catch up to its various competitors. Intel has been cutting costs at a fever pitch, and this allows Intel to do some expansion. Intel also gets to perk up its investors; if Nvidia thought Intel was a good buy, why shouldn’t regular investors? Intel also gets ready access to a better PC chip, which can now combine Intel’s central processor with Nvidia’s graphics processor, and create a win-win. Lastly, Intel also gets a boost in the data center.
About the only thing Intel does not get here is support for its foundry and production processes. It is still without a major customer, though we have seen some moves in that direction. Things are looking up for Intel right now…but they still have quite a ways to go.
Still Making Arcs
With Intel and Nvidia working together, it might seem like a bit of a long shot that Intel would still make the Arc line of graphics cards. After all, Nvidia’s GPUs are right there; why keep making your own when you can integrate them?
But Intel means to carry on with its Arc lineup. And not without reason, either, as the Arc line has done quite well so far. But Intel made it clear in a statement to PCWorld: “We’re not discussing specific roadmaps at this time, but the collaboration is complementary to Intel’s roadmap and Intel will continue to have GPU product offerings.”
Is Intel a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on two Buys, 25 Holds and four Sells assigned in the past three months, as indicated by the graphic below. After a 39.97% rally in its share price over the past year, the average INTC price target of $25.72 per share implies 12.93% downside risk.
