Intel's Future: A 7-Year Outlook and Investment Potential

Where Will Intel Be in 7 Years?

Intel (NASDAQ: INTC) has been the rare semiconductor stock that has faltered this year. In fact, as of Friday, Intel was down 34% for 2024, even as the one of the largest semiconductor sector exchange-traded funds (ETFs) was up 42%. And the trend over the past five years has been even worse, with Intel's underperformance compounding to ghastly levels: INTC Year to Date Total Returns (Daily) data by YCharts However, the company has recently issued positive updates on CEO Pat Gelsinger's ambitious turnaround plan, which began in 2021 and should reach the end of its first stage by next year. In recent months, Intel also issued a long-term financial model that goes out to 2030. If management keeps executing and hits its 2030 goals, that would make the stock very, very cheap at current levels. Five nodes in four years, while building a foundry Intel's ambitious turnaround has two main-components: becoming the technology leader again for its own products, and opening up its internal fab to external customers to compete with Taiwan Semiconductor Manufacturing (NYSE: TSM). But both of these goals center on the same premise: regaining manufacturing leadership for leading-edge nodes. That requires a lot of investment and success in chip design. Another obstacle making things more difficult: Intel's main cash-cow businesses in PC CPUs and traditional server CPUs have been depressed for the past couple of years following the pandemic. But for the things it can control, Intel has impressed. The company qualified to receive helping funds from the U.S. government via the CHIPS Act passed in late 2022, and lured in co-investments from big-name investors Brookfield Infrastructure Corporation and private equity firm Apollo Global. Additionally, Intel has even gotten some customers to pre-pay for its upcoming 18A node, which will be in production later this year. 18A is important, as the fifth node of the four-year plan, when management believes it will match TSMC's capabilities. Microsoft (NASDAQ: MSFT) recently became the most prominent company to announce it would become a customer of 18A, announcing that in February. Meanwhile, technology execution has been good. In June, Intel announced it had gotten its Intel 3 node, introduced late last year and the third node of the five-node plan, into mass production on schedule. Intel 3 is a 3nm node, equivalent to what TSMC first produced last year. But Intel's 20A and 18A nodes are following close behind, set for their first production later this year and mass production next year. Intel's 2030 model This year, Intel began separating out the internal foundry from its "Intel Products" division, or its in-house designed chips, calculating Products margins as if the Products segment were a third-party fabless company. As you can see, that business has a relatively high 24% operating margin, even though Intel's chips are currently on lagging-edge technology. However, the internal Foundry segment, when separated, shows a massive $7.0 billion loss. That probably spooked investors, as Intel's stock declined in the days after the April 2 presentation. Image source: Intel. Yet Intel has already booked $15 billion in cumulative lifetime value from third parties as of April, and that revenue hasn't shown up yet. As these customers scale, Intel sees the Foundry segment breaking even by 2027, eventually reaching a target of 30% operating margin by 2030, with annual revenue greater than $15 billion. Meanwhile, Intel's Products are forecast to get back to a 40% operating margin, where the company was back when it had process leadership. That should lead the overall company to a 35%-40% operating margin by 2030, with reasonable revenue assumptions. In a recent investor presentation, Intel's director of investor relations provided a model of about $100 billion in total revenue by 2030, based on reasonable industry growth prospects and regaining some market share Intel has lost. Intel's products will still take up the vast majority of its revenue if the external Foundry is at $15 billion in revenue, leaving about $85 billion for Intel Products revenue. Of note, Intel had $47.7 billion in Products revenue last year, even in a soft year for PCs and on lagging process technology. So that is really not that ambitious of an assumption in seven years' time. Cheap for 2030 Assuming Intel can hit these targets, which management has called reasonable and conservative, that would yield between $35 billion and $40 billion in 2030 operating income. Intel's market cap is only $140 billion today, which means if the company executes on this expensive and complicated turnaround, the stock is quite cheap, going for less than four times its potential 2030 operating income. Of course, the big questions around execution and the economic climate from now until then is are what's keeping the price down. But for optimists looking for cheap ways to play AI, this is a turnaround that may just be worth investing in. The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and Intel wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $722,626!* Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. Billy Duberstein and/or his clients have positions in Intel, Microsoft, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Microsoft and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short August 2024 $35 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Is Intel Stock a Buy Now?

Intel's (NASDAQ: INTC) stock popped 1% in mid-day trading on July 17, hitting as high as $37.16 per share before ending the day at $34.46. That growth alone isn't particularly noteworthy. However, what is significant is that while Intel's shares were rising, Nvidia's and AMD's stock prices tumbled 7% and 10%, respectively. These three companies are in steep competition in the chip market, each unveiling new artificial intelligence (AI) accelerators this year. Nvidia and AMD have far outperformed Intel in stock growth since last July. However, this shift in market results from rising tensions between the U.S. and China, which could threaten access to Taiwan Semiconductor Manufacturing Company's foundry services. Nvidia and AMD are heavily reliant on TSMC's manufacturing plants. Intel similarly uses the Taiwan-based company's services. However, it is also building chip fabs throughout the U.S., which could mitigate issues with China in the coming years and make it the world's leading chip manufacturer. Here's why Intel is a no-brainer buy this year. An attractive investment amid rising tensions with China A Bloomberg report on July 17 revealed that the Biden administration is considering more stringent trade restrictions on China as it continues its attempts to limit access to high-powered chips. The potential heightened crackdown would likely impose more severe restrictions on Tokyo Electron Ltd. and ASML Holding NV in an effort to curb their ability to give China access to advanced technology. Their stocks fell 11% and 12% respectively when the news broke. As a result, Intel has come out smelling like a rose amid strained relations with China after the company's heavy investment in building chip plants in the U.S. Last year, Intel announced a fundamental change in its operations, which would see it transition to a foundry model. The company is a leading recipient of President Biden's CHIPS Act, an initiative meant to expand the U.S.'s chip manufacturing capacity. Intel is slated to receive $8.5 billion from the U.S. government to help fund its foundry expansion. The tech giant has plans to build at least four chip plants in the U.S. and has already started construction on its Ohio location, which the company plans to be the world's largest AI chip factory. Chip demand has skyrocketed over the past year amid a boom in AI. High-performance hardware like graphics processing units (GPUs) are critical in training AI models. Meanwhile, many other tech sectors, such as cloud computing, virtual/augmented reality, gaming, and self-driving cars, increasingly need powerful chips to take their products to the next level. So, if Intel can steal manufacturing market share from TSMC with its U.S.-based factories, the company could enjoy major financial and stock gains over the long term. A better value than its chip market rivals Shares in Nvidia and AMD have climbed 706% and 146%, respectively, since the start of 2023, receiving a healthy boost from AI hype. While the growth has made many current stockholders rich, it has also made it more challenging for new investors to buy in. By contrast, Intel's more moderate stock rise of 30% in that period has kept its valuation at a more attractive price point. Data by YCharts. According to the data above, Intel has by far the lowest price-to-earnings (P/E) and price-to-sales (P/S) ratio among its top AI rivals. These figures make Intel stock look like a bargain compared to Nvidia and AMD. P/E and P/S multiples are helpful metrics for determining a stock's value. The P/E is calculated by dividing a company's stock price by its earnings per share. P/S multiple divides a company's total market capitalization by its trailing 12-month revenue. For both metrics, the lower the figure, the better the bargain. As a result, the chart suggests Nvidia's and AMD's earnings haven't quite caught up with their share prices, with Intel's stock more in line with its current financial position. With its expanding role in the foundry market and AI, Intel stock is a must-buy right now. The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and Intel wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $722,626!* Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Is Intel Stock a Buy Now? | The Motley Fool

Intel's (INTC -5.42%) stock popped 1% in mid-day trading on July 17, hitting as high as $37.16 per share before ending the day at $34.46. That growth alone isn't particularly noteworthy. However, what is significant is that while Intel's shares were rising, Nvidia's and AMD's stock prices tumbled 7% and 10%, respectively. These three companies are in steep competition in the chip market, each unveiling new artificial intelligence (AI) accelerators this year. Nvidia and AMD have far outperformed Intel in stock growth since last July. However, this shift in market results from rising tensions between the U.S. and China, which could threaten access to Taiwan Semiconductor Manufacturing Company's foundry services. Nvidia and AMD are heavily reliant on TSMC's manufacturing plants. Intel similarly uses the Taiwan-based company's services. However, it is also building chip fabs throughout the U.S., which could mitigate issues with China in the coming years and make it the world's leading chip manufacturer. Here's why Intel is a no-brainer buy this year. A Bloomberg report on July 17 revealed that the Biden administration is considering more stringent trade restrictions on China as it continues its attempts to limit access to high-powered chips. The potential heightened crackdown would likely impose more severe restrictions on Tokyo Electron Ltd. and ASML Holding NV in an effort to curb their ability to give China access to advanced technology. Their stocks fell 11% and 12% respectively when the news broke. As a result, Intel has come out smelling like a rose amid strained relations with China after the company's heavy investment in building chip plants in the U.S. Last year, Intel announced a fundamental change in its operations, which would see it transition to a foundry model. The company is a leading recipient of President Biden's CHIPS Act, an initiative meant to expand the U.S.'s chip manufacturing capacity. Intel is slated to receive $8.5 billion from the U.S. government to help fund its foundry expansion. The tech giant has plans to build at least four chip plants in the U.S. and has already started construction on its Ohio location, which the company plans to be the world's largest AI chip factory. Chip demand has skyrocketed over the past year amid a boom in AI. High-performance hardware like graphics processing units (GPUs) are critical in training AI models. Meanwhile, many other tech sectors, such as cloud computing, virtual/augmented reality, gaming, and self-driving cars, increasingly need powerful chips to take their products to the next level. So, if Intel can steal manufacturing market share from TSMC with its U.S.-based factories, the company could enjoy major financial and stock gains over the long term. Shares in Nvidia and AMD have climbed 706% and 146%, respectively, since the start of 2023, receiving a healthy boost from AI hype. While the growth has made many current stockholders rich, it has also made it more challenging for new investors to buy in. By contrast, Intel's more moderate stock rise of 30% in that period has kept its valuation at a more attractive price point. According to the data above, Intel has by far the lowest price-to-earnings (P/E) and price-to-sales (P/S) ratio among its top AI rivals. These figures make Intel stock look like a bargain compared to Nvidia and AMD. P/E and P/S multiples are helpful metrics for determining a stock's value. The P/E is calculated by dividing a company's stock price by its earnings per share. P/S multiple divides a company's total market capitalization by its trailing 12-month revenue. For both metrics, the lower the figure, the better the bargain. As a result, the chart suggests Nvidia's and AMD's earnings haven't quite caught up with their share prices, with Intel's stock more in line with its current financial position. With its expanding role in the foundry market and AI, Intel stock is a must-buy right now.

Where Will Intel Be in 7 Years? | The Motley Fool

If Intel delivers on its 2030 guidance, the stock is quite cheap. But it's a big "if." Intel (INTC -5.42%) has been the rare semiconductor stock that has faltered this year. In fact, as of Friday, Intel was down 34% for 2024, even as the one of the largest semiconductor sector exchange-traded funds (ETFs) was up 42%. And the trend over the past five years has been even worse, with Intel's underperformance compounding to ghastly levels: However, the company has recently issued positive updates on CEO Pat Gelsinger's ambitious turnaround plan, which began in 2021 and should reach the end of its first stage by next year. In recent months, Intel also issued a long-term financial model that goes out to 2030. If management keeps executing and hits its 2030 goals, that would make the stock very, very cheap at current levels. Intel's ambitious turnaround has two main-components: becoming the technology leader again for its own products, and opening up its internal fab to external customers to compete with Taiwan Semiconductor Manufacturing (TSM -3.55%). But both of these goals center on the same premise: regaining manufacturing leadership for leading-edge nodes. That requires a lot of investment and success in chip design. Another obstacle making things more difficult: Intel's main cash-cow businesses in PC CPUs and traditional server CPUs have been depressed for the past couple of years following the pandemic. But for the things it can control, Intel has impressed. The company qualified to receive helping funds from the U.S. government via the CHIPS Act passed in late 2022, and lured in co-investments from big-name investors Brookfield Infrastructure Corporation and private equity firm Apollo Global. Additionally, Intel has even gotten some customers to pre-pay for its upcoming 18A node, which will be in production later this year. 18A is important, as the fifth node of the four-year plan, when management believes it will match TSMC's capabilities. Microsoft (MSFT -0.74%) recently became the most prominent company to announce it would become a customer of 18A, announcing that in February. Meanwhile, technology execution has been good. In June, Intel announced it had gotten its Intel 3 node, introduced late last year and the third node of the five-node plan, into mass production on schedule. Intel 3 is a 3nm node, equivalent to what TSMC first produced last year. But Intel's 20A and 18A nodes are following close behind, set for their first production later this year and mass production next year. This year, Intel began separating out the internal foundry from its "Intel Products" division, or its in-house designed chips, calculating Products margins as if the Products segment were a third-party fabless company. As you can see, that business has a relatively high 24% operating margin, even though Intel's chips are currently on lagging-edge technology. However, the internal Foundry segment, when separated, shows a massive $7.0 billion loss. That probably spooked investors, as Intel's stock declined in the days after the April 2 presentation. Yet Intel has already booked $15 billion in cumulative lifetime value from third parties as of April, and that revenue hasn't shown up yet. As these customers scale, Intel sees the Foundry segment breaking even by 2027, eventually reaching a target of 30% operating margin by 2030, with annual revenue greater than $15 billion. Meanwhile, Intel's Products are forecast to get back to a 40% operating margin, where the company was back when it had process leadership. That should lead the overall company to a 35%-40% operating margin by 2030, with reasonable revenue assumptions. In a recent investor presentation, Intel's director of investor relations provided a model of about $100 billion in total revenue by 2030, based on reasonable industry growth prospects and regaining some market share Intel has lost. Intel's products will still take up the vast majority of its revenue if the external Foundry is at $15 billion in revenue, leaving about $85 billion for Intel Products revenue. Of note, Intel had $47.7 billion in Products revenue last year, even in a soft year for PCs and on lagging process technology. So that is really not that ambitious of an assumption in seven years' time. Assuming Intel can hit these targets, which management has called reasonable and conservative, that would yield between $35 billion and $40 billion in 2030 operating income. Intel's market cap is only $140 billion today, which means if the company executes on this expensive and complicated turnaround, the stock is quite cheap, going for less than four times its potential 2030 operating income. Of course, the big questions around execution and the economic climate from now until then is are what's keeping the price down. But for optimists looking for cheap ways to play AI, this is a turnaround that may just be worth investing in.