It was not so long ago when chip stock Intel (INTC) was celebrating landing big new investments from SoftBank (SFTBY) and the United States government. Now, it has one major new investor, and one that happens to be a major competitor as well. Nvidia (NVDA) is throwing in its lot with Intel, and the news was an utter delight for shareholders. Intel shares blasted up over 23% in Thursday afternoon’s trading.
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This particular round of investment was even better; Nvidia looked to put fully $5 billion into Intel’s operations, and also start up a new partnership effort to develop chips together in the desktop and data center markets. This investment dwarfs the investment from SoftBank, which was around $2 billion, though runs well behind the United States government, who put in enough to buy 10% of Intel outright.
This news actually dovetails well with Nvidia’s other plans, as Nvidia revealed plans to put in over $14 billion in various artificial intelligence (AI) and data center infrastructure operations throughout the United States. So buying in on Intel, which commonly makes chips for data centers, would be a great way to do just that.
Coming Out in Favor
Meanwhile, the move from the United States government to buy that piece of Intel has been commonly regarded as controversial pretty much since its announcement. But there have been those in favor just as much as those opposed, and someone else came out in favor: former director of the National Economic Council, Gary Cohn.
Cohn noted, “We cannot be dependent on the rest of the world for chips.” Since Intel is the only leading-edge chip manufacturer America has, reports note, that means that Intel will be the source from which further developments emerge. That puts a particular importance in investment; while Intel has certainly made a big deal out of cost-cutting, no company can cost-cut its way to success. Outside investment and growing sales are a much surer path.
Is Intel a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on one Buy, 25 Holds and three Sells assigned in the past three months, as indicated by the graphic below. After a 17.79% rally in its share price over the past year, the average INTC price target of $22.34 per share implies 27.16% downside risk.
