The journey for investors in Intel (NASDAQ: INTC) has been akin to a rollercoaster ride over the past few years. Once the unassailable leader in the CPU market and a key supplier for Apple’s MacBook lineup, Intel’s dominance has ebbed due to remarkable competition.
Advanced Micro Devices (AMD) began chipping away at Intel’s CPU market share in 2017, with Intel’s share plummeting to 69%. Furthermore, the loss of Apple as a client in 2020 caused Intel’s stock to dip by 7% over three years and witnessed an alarming decline in annual revenue by 20%, with operating income taking a staggering 90% nosedive.
However, Intel’s fall from grace seems to have reignited its entrepreneurial spirit. According to Mercury Research, Intel made a significant turnaround by regaining 3% of the CPU market share from AMD in the last year. Moreover, realizing the need to adapt to the evolving landscape, the company has begun to focus on the burgeoning artificial intelligence (AI) market, signaling a substantial shift in its strategic direction.
1. Intel’s Focus on AI Augurs Well for Investors
The AI market grew to almost $200 billion last year and is projected to sustain a compound annual growth rate of 37% through 2030, potentially exceeding a valuation of $1 trillion before the decade ends. This makes it no surprise that companies like Intel are making AI development their top priority.
While Nvidia has been the frontrunner, capturing an estimated 90% market share in AI graphics processing units (GPUs), essential for training and running AI models, Intel is gearing up to challenge Nvidia’s dominance in AI. Intel’s recent announcement of a new range of AI GPUs, Core Ultra processors, and Xeon server chips, all equipped with neural processing units designed to run AI programs more efficiently, indicates a significant shift in its focus.
2. Reaping the Rewards of a Recovering PC Market
Macro headwinds led to a sharp decline in the PC market in recent years, compounded by consumer spending reductions due to inflation. However, the tide seems to be turning, as Intel stands to benefit significantly from a revival in the PC market. Intel’s recent earnings reflect this optimism, with a notable 2% rise in desktop chip sales and a substantial 22% surge in notebook segment revenue in the last quarter, despite an overall decline in total revenue.
3. Projected Earnings Per Share (EPS) Growth in 2024
Amidst a recovering PC market and its expanded focus on AI technology, Intel’s EPS estimates for the next fiscal year signal substantial gains, boosting confidence in the company’s growth potential. Projections indicate that Intel’s earnings could reach nearly $3 per share by fiscal 2024, reflecting a potential stock growth of 42% over the next fiscal year, based on reasonable financial forecasts.
Intel’s strong resurgence in the AI arena, coupled with an optimistic outlook for the recovering PC market, positions the company as an enticing investment opportunity in 2024.
Before jumping into investing in Intel, it’s essential to conduct thorough due diligence. Remember, while Intel appears to be on a path to recovery, potential investors should weigh the risks carefully and consider consulting a financial advisor before making any investment decisions.
Data by YCharts