Source: PaxForex Premium Analytics Portal, Fundamental Insight
Intel has consistently lagged behind in stock market performance for an extended period. This is evident as the stock's value has shown minimal growth over the past five years, in stark contrast to the remarkable 148% surge in the Nasdaq-100 Technology Sector index during the same timeframe.
However, the year 2023 marked a significant turnaround for Intel investors, with the stock experiencing an impressive 60% increase, outperforming the Nasdaq-100's 50% gains. This robust rally has propelled Intel's market capitalization to $199 billion. The question now arises: Can Intel sustain this momentum and potentially become a member of the trillion-dollar market cap club by the year 2030? Let's delve into this inquiry.
Intel struggled to capture the stock market's attention in the last five years due to its weak financial performance, attributed to losing market share to Advanced Micro Devices (AMD -0.21%) and missing opportunities in high-demand tech sectors like gaming graphics cards and consoles.
During this period, Intel witnessed a staggering annual erosion of almost 31% in earnings. However, analysts are now optimistic, foreseeing an annual earnings growth rate exceeding 10% over the next five years. The anticipated turning point for Intel's fortunes is expected to commence in 2024.
The catalysts for this expected turnaround in Intel's earnings growth lie in the revival of the personal computer (PC) market and the increasing demand for artificial intelligence (AI) chips. Market research firm IDC reported a 14% decline in PC shipments last year but predicts a 3.4% increase in 2024. This revival is attributed to the aging installed base of commercial PCs requiring upgrades and the integration of AI capabilities into new PCs, which is set to kick off in 2024. The introduction of AI-enabled PCs is anticipated to drive multi-year growth in this market.
Intel has strategically entered this arena with its Core Ultra processor, set to power over 230 of the world's first AI PCs from various partners. The company's move aligns well with the expected surge in the AI PC market, potentially giving Intel an edge over AMD. AMD, in its October 2023 earnings call, boasted of having "more than 50 notebook designs powered by [its] Ryzen AI in [the] market."
While AMD has gained ground in the client CPU market, Intel's focus on widespread deployment of its AI CPUs for notebooks and desktops could help mitigate market share losses and tap into new growth opportunities.
In the realm of AI-focused data center processors, Intel has gained traction. Databricks, a data analytics platform provider, noted that Intel's Gaudi 2 accelerators can rival Nvidia's H100 and A100 data center graphics cards in AI inference. Intel's AI accelerator chips offer superior performance-per-dollar for both training and inference applications, according to Databricks. Intel's customer pipeline for Gaudi processors nearly doubled in just three months, indicating growing interest.
As the market for AI chips is poised to explode, reaching an estimated $305 billion in annual revenue by 2030, Intel seems well-positioned for solid growth. While the discussed catalysts bode well for Intel's sustained momentum, the question remains whether these factors will be sufficient to propel it into the trillion-dollar company club.
Intel's earnings are poised for rapid growth in 2024 and 2025, with a five-year forecast projecting a respectable but modest 10% annual increase. The surge in demand for AI chips, as exemplified by Nvidia, has demonstrated the potential to substantially elevate a company's bottom-line growth.
If we assume that the heightened demand for AI PCs and Intel's AI server chips propels its annual earnings growth rate to 20%, sustained through 2030, projections indicate potential earnings reaching $5.64 per share by the end of the decade, using the 2024 forecasted earnings of $1.89 per share as the baseline. Applying the Nasdaq-100's forward earnings multiple of 28, which serves as a proxy for tech stocks, this scenario suggests a stock price of $158 in 2030.
While this would signify a substantial 3.2 times increase from the company's current stock price, placing Intel short of the trillion-dollar valuation by 2030 with its current market cap at $199 billion, it is noteworthy that Intel is positioned for significant upside in the next seven years, even if it falls short of the trillion-dollar milestone.
Moreover, if Intel achieves stronger-than-expected earnings growth and commands a higher valuation due to its AI-driven expansion, there exists the potential for the company to eventually join the trillion-dollar club. This underscores the rationale for investors to consider acquiring this semiconductor stock now. Currently trading at a comparatively modest 26 times forward earnings in contrast to the Nasdaq-100's forward earnings multiple, the stock may present a more attractive valuation presently than in the future if its upward trajectory persists.
As long as the price is below 32.00, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 30.51
- Take Profit 1: 28.00
- Take Profit 2: 26.00
Alternative scenario:
If the level of 32.00 is broken-out, follow the recommendations below::
- Time frame: D1
- Recommendation: long position
- Entry point: 32.00
- Take Profit 1: 34.00
- Take Profit 2: 36.00
