INTEL - 2025 Comeback Stock ?
2025 promises to be an important one for $Intel(INTC)$ .
Intel's recent years performances have been mixed, with significant stock price fluctuations over the past four years.
Looking Back.
The decrease in INTC over the last 4-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500.
Returns for the stock were:
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6% in 2021.
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-47% in 2022.
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95% in 2023.
As we head towards year end, there is optimism that 2025 could be a pivotal year for Intel.
Brighter Future For Core Businesses ?
Some analysts have expressed that coming year might signal a turnaround for this grand dame if internally, she plays her cards right and externally, market conditions improved.
Below are three main factors.
(1) CPU Recovery.
Intel has lost considerable ground in the CPU market in recent years, while rival AMD has been gaining share.
Its broader pivot to AI accelerators has also ‘hurt’ demand for the company’s CPUs.
However, Intel’s latest lineup looks promising.
The Lunar Lake chip designed for laptops, ultra-compact devices and Arrow Lake chip for desktops, both built on $Taiwan Semiconductor Manufacturing(TSM)$'s advanced 3nm process, could give INTC a better shot at competing with AMD in the near term.
(2) PC Market Recovery:
A resurgence in PC demand, coupled with Intel's improved product lineup, could significantly boost its revenue.
(3) AI & Server - Market Opportunities:
Intel is expanding its presence in the AI processor space with its AI accelerators — Gaudi 2 and upcoming Gaudi 3.
This comes about as AI market begins to evolve from (i) model training to (ii) model inferencing.
Model inferencing:
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Is the process of generating outputs and answers from trained models.
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It is less computationally intensive.
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Therefore, it is possible that these tasks can be handled adequately well by AI processors from Intel and AMD.
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Freeing up the more expensive Nvidia chips for Model training instead.
As companies shift focus from AI model training to inference, Intel's AI accelerators, like Gaudi 3, could gain traction due to their cost-effectiveness.
Costs have always been a concern for end customers of AI chips.
Economics of AI business / project remains weak because:
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Current heavy investments in GPU chips yielding minimal revenues.
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There’s a possibility that from 2025, companies could be a lot more circumspect with their AI spendings.
Although Gaudi 2 sales have been lackluster,
Gaudi 3 - Intel’s newest accelerator that costs about 50% cheaper than Nvidia’s, could make it, a more favourable price-to-performance tradeoff.
Additionally, Intel's latest Server chips - Sierra Forest & Granite Rapids, are expected to compete favourably with AMD's offerings.
Q4 Revenue Guidance.
With the above, INTC’s Q4 revenue guidance was also better than expected.
Sales are projected to be between $13.3 billion and $14.3 billion, indicating the trends are being played out.
18A Process Node
Intel is also banging on its 18A process, its most advanced, to turn the Foundry business around.
** What is 18A ?
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It is Intel's semiconductor manufacturing process that aims to improve transistor density and power efficiency
The process produces chips with technologies including RibbonFET gate-all-around transistors and PowerVia backside power delivery, that are expected to boost performance & power efficiency.
With this technology, Intel has secured contract with US Department of Defense (DoD) for the RAMP-C program, that seeks to bring leading-edge semiconductor technology domestically.
Other high-profile customers include $Amazon.com(AMZN)$ and $Microsoft(MSFT)$ , which intend to design custom chips, including AI accelerators.
Intel expects external customers to tape out (move from design to foundry for manufacturing) their first 18A designs in 2025, with enterprise-scale production to begin thereafter.
When and If Intel executes this transition effectively, it could shift the narrative around the stock, justifying the significant investments made in its foundry business over the past few years.
Trump Boost.
Returning president, Donald Trump’s emphasis on boosting US manufacturing could work in Intel’s favour, given its sizable domestic fabrication footprint.
Although too early to conclude, Intel could see regulatory support aimed at boosting domestic chip production.
Stronger emphasis on domestic production, (either through tariffs or other policies):
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Could drive more business to Intel’s foundry that produces chips for third-party customers.
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Result in stronger demand, as companies look to rely on US suppliers to avoid potential tax duties.
Trump has consistently emphasized that semiconductors are critical for national security.
This will be an area where Intel’s domestic manufacturing might be viewed as contributing to protecting US technological independence.
Intel could also see more contracts awarded to it from government agencies, being the only American semiconductor player that designs and fabricates leading-edge logic chips within the US
Meaning - the company’s domestic chip supply chain could help it win more contracts under Trump, who boosted military spending during his last term.
2025 Valuation.
Intel stock trades at about $20 per share currently or 21x consensus 2025 earnings, which is reasonable given the above factors.
Intel is also expected to return to growth next year with consensus pointing to about 6% revenue expansion.
Forbes value Intel stock at about $25 per share, slightly ahead of the current market price by 25%.
Intel's 2025 is filled with promise. A strong product pipeline, focus on emerging AI technologies, and potential support from the government might just be what the doctor orders. Bet on Intel ?
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Do you think if Intel reinstate dividends issue, it will boost investors’ confidence in the stock ?
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Do you think if above activities pan out in 2025, then ex-CEO Pat Gelsinger is credible afterall ?
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Celebrity trader Jim Cramer timely reminder : When trading investors should NOT get disillusioned by strong gains. Bulls & Bears both "make money"on the stk mkt.
It's the pigs that "get slaughtered".
Good luck everyone as 2025 is just 1-step away.