As semiconductor stocks stall from moving to new highs, Intel Corporation (NASDAQ:INTC) is not moving in either direction. The stock is stock in a wide trading range of between $33.23 and $38.45.
Despite offering a dividend yielding around 3.1% and a stock valued at a forward price-to-earnings of 11 times, Intel may suit patient value investors. The chip giant continues to dominate in the mature desktop computing space. It is branching out its business, too. It acquired Mobileye NV (NYSE:MBLY), in an effort to develop autonomous driving solutions.
INTC Stock and Micron
Intel is not the only deep-value semiconductor play. Its partner, Micron Technology, Inc. (NASDAQ:MU), trades at a forward P/E of around 5 times. Together, the two developed 3D XPoint, an important “NVM,” or non-volatile memory solution. That gives the market massive data read/write speed increases and will speed up real-time data crunching demands.
Last March, Intel introduced Optane SSD DC P4800X. This is the first product that incorporates the 3D XPoint memory.
Since the technology targets the commercial space, customers that require extremely quick I/O workloads will buy this product.
Investors rewarded MU stock for its potential revenue from 3D XPoint but left INTC stock behind. Micron rose over 90% from its 12-month low while Intel’s stock is up just 4% from its bottom. In reality, Micron’s growth accelerated thanks to higher DRAM (memory) and NAND (SSD) prices. Growing demand for products using 3D XPoint will benefit both companies.
Ice Lake
In the processor space, Intel posted that its upcoming chip, Ice Lake, will be manufactured under the 10 nm+ process technology. Similarly, Advanced Micro Devices, Inc. (NASDAQ:AMD) has a road map that includes a smaller manufacturing die process. Unfortunately for Intel, AMD is more ambitious with Zen 2. It plans to release 7nm products later this year.
Chip makers having the smaller process technology gain an advantage because they may get higher product yield per wafer. The differences between AMD and Intel may not give either company a practical advantage over each other. Intel is simply a bigger company and may still keep its market share while profit margins fall. AMD is smaller, has limited cash, and must carefully exercise its product launch roadmap. Any delays in the launch would hurt AMD more than it would hurt Intel.
Investors need not worry that Intel will face delays accomplishing a 10nm+ process. The latest Apple, Inc. (NASDAQ:AAPL) iPad Pro has 10nm SoC shipping. The suppliers are capable of such manufacturing techniques. This suggests that both AMD and Intel should have no problems with their next-generation chip production.
Back to the Topic of Autonomous Driving
Time will tell if Intel paid too much for its Mobileye acquisition. For now, investors will have to watch for clues that the addressable market for autonomous driving is getting bigger. Automobile manufacturers are embracing ADAS but watch for these companies investing in the technology.
If they expand their budgets, chip companies — especially Intel — will see a payoff.
Takeaway
Competition is heating up in the PC chip market as AMD introduces new CPU products. Fortunately, Intel has a line of products that will be ready with the heightened competition. Outside of this market, Intel is getting into autonomous driving technology. This will ultimately rejuvenate its growth and give investors something to look forward to.
As of this writing, Chris Lau did not hold a position in any of the aforementioned securities.
