U.S. markets closed
  • S&P 500

    -18.19 (-0.48%)
  • Dow 30

    -469.64 (-1.50%)
  • Nasdaq

    +72.92 (+0.56%)
  • Russell 2000

    +0.88 (+0.04%)
  • Crude Oil

    -1.87 (-2.94%)
  • Gold

    -42.40 (-2.39%)
  • Silver

    -0.98 (-3.56%)

    -0.0099 (-0.81%)
  • 10-Yr Bond

    -0.0580 (-3.82%)

    -0.0091 (-0.65%)

    +0.3200 (+0.30%)

    -1,640.42 (-3.45%)
  • CMC Crypto 200

    -20.25 (-2.17%)
  • FTSE 100

    -168.53 (-2.53%)
  • Nikkei 225

    -1,202.26 (-3.99%)

Is This the Right Time to Buy Intel Shares?

  • Oops!
    Something went wrong.
    Please try again later.
Sejuti Banerjea
·4 min read
  • Oops!
    Something went wrong.
    Please try again later.

Last month, Intel INTC released very strong fourth-quarter results with earnings beating by 42 cents (38.2%) on revenues that beat by $2.5 billion (14.4%). Management attributed two-thirds of the earnings beat to operational factors.

Strength was driven by consumer notebooks in entry-level and education (a trend that’s expected to continue through the year). The pandemic-inflicted slowdown in enterprise, data center and IoT markets are expected to ease in the second half of the year.

In the meantime, it appears that pent-up demand is driving semiconductor shortage across a number of markets, including smartphones and auto, which should be good for pricing.

So it was likely incoming CEO Pat Gelsinger’s words “I am confident that the majority of our 2023 products will be manufactured internally” that sent the shares crashing. Up until then, investors had been hoping that Taiwan Semiconductor’s TSM huge capex target and its leading edge foundries meant that Intel was going to give it some business. But Gelsinger also said that “At the same time, given the breadth of our portfolio, it's likely that we will expand our use of external foundries for certain technologies and products.” So it won’t be doing everything internally.

It was widely believed that if Intel could only use the leading edge facilities in Asia, it would have a better chance of stemming share losses to Advanced Manufacturing Devices AMD. But it’s a little more complicated than that.

The future of technology, and indeed every aspect of our lives, will be completely reshaped by emerging technologies like artificial intelligence and quantum computing. These technologies would bring more than a thousand fold increase in compute power (and perhaps more than that, with time), rendering many of our current activities redundant. It would bring a new paradigm in things like cyber security and also national security (since quantum computing can crack encryptions faster than you can create them).

The wars of the future would change too, with AI, AR/VR and robotics. The point is, it’s only the country/s that’s in control of its own tech that will win in this revolution that will unfold over the next decade. And you don’t have control if you’re outsourcing everything to Asia.

Intel is one of three companies in the world that manufactures advanced semiconductors (the others being TSM and Samsung). It’s also working on the quantum computing side of things. Jim Clarke, director of quantum hardware in the Components Research Group at Intel, was appointed as a member of the National Quantum Initiative Advisory Committee in August last year. Around the same time, it won the second phase of a contract to help the U.S. military make chips (the first phase was awarded in 2019).

What’s more, the Biden administration, while not making a public spectacle of the conflict with China, promised $300 billion in innovation funding, partly to stay ahead of China. If it’s true that China has stolen quantum computing secrets, the race to the top just got way more competitive. A recent Bloomberg report also talked about China stockpiling chips and hoarding manufacturing equipment in anticipation of U.S. sanctions. So China is preparing for the worst.

Therefore, Intel being at the center of the country’s semiconductor manufacturing innovation will naturally be doubling down on what it knows best. And this can only be a good thing for investors.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Taiwan Semiconductor Manufacturing Company Ltd. (TSM) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research