Which is the best chip stock to play the AI theme? Nvidia? SMCI? AMD, maybe? Most will be surprised to learn that it is actually more of a napping giant that claims that accolade.
According to Northland’s Gus Richard, a 5-star analyst ranked in the top 1% of Street experts, it is Intel (NASDAQ:INTC) that “wins the AI era.”
That might be a bit confounding, considering the well-documented struggles of the semi behemoth over the past few years, so how did Richard come to that conclusion?
Well, it’s all about manufacturing. Over the past decade, the only firms to have developed leading-edge logic process technology are TSMC, Intel, and Samsung. Intel has now successfully regained momentum in its process technology development and is actively establishing an ecosystem to operate as a foundry. In Richard’s view, Intel stands out as the sole viable alternative to TSMC and Samsung.
“While Intel foundry is still in the gestation phase, our confidence it will be a player in the foundry market continues to increase. Intel has an unrecognized scarcity value, and we believe the shares will significantly outperform over the next 3-5 years,” Richard opined.
Richard says there are changes taking place in the foundry landscape that are poised to benefit Intel. It should be noted that over the last 20 years, Intel has been the pioneer in transitioning new transistor technologies into production, such as strained silicon, high-k metal gate, and FinFET transistors. The analyst thinks it is quite probable Intel will be the first to achieve a “production-worthy” gate-all-around technology at 2nm.
Additionally, Intel holds a clear edge in backside power, which offers a 20% improvement in area. In today’s context, a 20% increase in density represents a notable advancement in process nodes. Moreover, INTC holds a leadership position in advanced packaging. Historically, the company has been at the forefront of developing process technology tailored for high-performance computing.
“By the end of this year, it should be clear which company has process technology leadership,” Richard goes on to confidently say. “We think INTC will retake its market share in the high-performance computing market, where it has lost its share over the last decade.”
With such a ringing endorsement, it’s no surprise that Richard is INTC’s biggest bull on the Street, issuing an Outperform (i.e. Buy) rating on the stock. His Street-high $68 price target implies Intel shares will gain ~52% over the coming months. (To watch Richard’s track record, click here)
Joining Richard’s bullish outlook, 7 other analysts share his sentiment, while 4 analysts maintain a bearish stance, advocating for a Sell. However, they are outnumbered by 24 Holds, resulting in a consensus view of Hold (i.e. Neutral). The average target price lands at $47.22, indicating a modest 5.5% growth in shares over the next year. (See Intel stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
