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Intel Collaborates with AWS to Strengthen Position in IoT

Zacks Equity Research

Per some media reports, Intel Corp INTC recently inked a deal with Amazon.com’s, AMZN Amazon Web Services (AWS) to further strengthen its position in the growing Internet of Things (IoT) space. The aim of the collaboration is to develop two smart home solutions.

The first solution will involve the integration of Intel’s smart home hub along with Alexa Skills, the voice service for AWS’ Echo. The second solution will involve the development of a smart speaker reference design that is powered by an Intel chip to enable hardware manufacturers build appliances that are voice enabled.  

Additionally, with the help of AWS’s Greengrass software, Intel will develop an IoT asset-tracking solution meant for the industrial market.

INTEL CORP Price

INTEL CORP Price | INTEL CORP Quote

What this Means for Intel?

As per an IDC report, the IoT ecosystem is estimated to be worth 1.7 trillion in revenues by 2020 with the number of connected devices reaching nearly 30 billion. Given the huge scope the segment offers, Intel’s deal with AWS looks aptly timed and augurs well for the company in the long run.

We note that Intel is gradually shifting its focus on smart technologies. Recently, the company inked a deal with Delphi Automotive DLPH to supply highly efficient computer processors for its future self-driving vehicle systems. (Read More: Intel to Supply Processors for Delphi's Smart Car Systems)

With such collaborations, Intel is leaving no stone unturned to grab the opportunities in the IoT space.

Stock Performance Overview

We note that Intel’s stock price has underperformed the broader Zacks Semi General industry over the last one year. While the stock generated a negative return of 0.9%, the sector generated a positive return of 20.8%.

The underperformance of the stock could be due to a declining PC market, revenue concentration and a failed mobile initiative. Additionally, ARM-based competition claiming greater performance at lower cost of ownership, major customers like Google looking for alternatives and weakness in China are the other factors that are affecting the stock’s performance adversely.

However, data center is currently the most promising area where macro factors are impacting the enterprise side (cloud remains strong). Intel’s investments in IoT, security and memory could pay off this year. We believe that these investments will help the stock rebound going ahead.

Zacks Rank and Stock to Consider

At present, Intel carries a Zacks Rank #3 (Hold).

A better-ranked stock in the broader technology space is NVIDIA Corporation NVDA, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank  stocks here.

Notably, the consensus estimate for NVIDIA’s current year has improved to $2.48 from $1.86 over the last 30 days. 

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