I can’t remember the last time I wrote about Intel Corporation (NASDAQ:INTC) and INTC stock, so the fact I drew this assignment is exciting — if for no other reason than I get to revisit one of the great California tech stories of the last 50 years.
Boy, is INTC stock hot! It’s up 18% in the last three months through Oct. 9. In fact, only a day earlier, Intel hit a 10-year high of $39.89 a share.
So, what is going on that’s got investors all hot and bothered? To get me up to speed, I’ve turned to some of my good friends at InvestorPlace for answers.
Intel’s Reach is Widening
Feature writer James Brumley covered a trio of Intel news stories Oct. 9, all of which suggested the company is widening its reach into all the places it needs to if it wants to be a player in the modern tech world.
While its reasonably priced Coffee Lake CPUs allow it to compete effectively with AMDs Ryzen processors, it’s the company’s move into Tesla Inc (NASDAQ:TSLA) that’s got “future” written all over it.
“Intel appears to have edged out NVIDIA as the provider of the silicon-based brain of Tesla’s infotainment system… Truth be told, there’s room for all three companies’ technologies [Intel, Nvidia and AMD] in the popular electric cars,” Brumley stated. “It’s a high-profile moral victory all the same though, bringing Intel back into the autonomous car landscape where it can also (re)tout the fact that it now owns Mobileye, which is arguably still the big name in self-driving automobile technologies.”
Tesla might be having a heck of a time ramping up production of the Model 3, but it’s still a company you want to be associated with when it comes to technology and electric cars. The other being Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) and its Waymo self-driving car, which Brumley suggests Intel has been working on since 2009.
2017 Second-Quarter Earnings
InvestorPlace’s Tom Taulli covered Intel before its second-quarter earnings report July 27. On the top- and bottom-line, analysts were expecting $14.4 billion in revenue and $0.68 in earnings; they came in at $14.8 billion in revenue and $0.72 in earnings — a double beat. INTC stock has been on the rise ever since.
Taulli’s most significant concerns heading into that report were two-fold: First, how was Intel doing on the artificial intelligence and Internet-of-Things front? And, secondly, how was the integration of its acquisitions, including Mobileye, coming along?
Well, on the AI front, Intel’s venture capital arm invested more than $1 billion into startups that include Lumiata, a company that uses AI-powered analytics to help companies manage risk. Currently, according to Engadget, it’s also working on Loihi, a chip that attempts to mimic the human brain. Unfortunately, the chip is a long way from meeting the 80 billion neurons thought to exist in the human brain. Still, INTC is clearly making progress on the AI front.
As for the Internet-of-Things, Brumley mentioned that Intel has come up with a service called Secure Device Onboarding, or SDO for short, that makes it much faster to activate IOT devices, an important consideration when trying to connect millions of devices. While still in its infancy, SDO could be a significant development for Intel.
As for the $15.3 billion Mobileye acquisition, Intel closed that M&A deal Aug. 8. It’s merged its existing autonomous driving diving with Mobileye. During its Q2 2017 earnings call, CFO Robert Swan said Mobileye would contribute $200 million in revenue, $100 million in operating income and 2 cents per share in the final two quarters of fiscal 2017. Investors won’t know the full extent of its contributions until sometime in 2018. So far, so good.
Bottom Line on INTC Stock
It might not be nearly as sexy as NVDA or AMD, but considering Intel generates more than twice the free cash flow it needs to pay out the 2.8% dividend yield on INTC stock, I realize I’ve been away far too long.
Intel still has game.
Conservative investors ought to consider INTC stock as a safe play in the semiconductor industry, despite it being at a 10-year high.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.